In a historic first, S&P 500 companies will post a net loss

This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.

A grim new data point for this recession: Companies in the Standard & Poor’s 500 index are on track to post an overall net loss for the fourth quarter -- a dismal feat they’ve never before accomplished in the modern era.

With quarterly results now in for nearly 80% of the companies in the index, S&P calculates that the bottom line is showing a loss of $10.44 a share for the index as a whole.

That first-ever red ink is primarily a result of massive write-offs that many companies, particularly banks, took last quarter to try to clean up their balance sheets. So the number overstates the effect of the economy’s downturn on companies’ results.

Still, a huge write-off, even if it’s an accounting entry, is an admission of a major corporate mistake that shareholders must bear.

Excluding write-offs, the S&P 500 companies will show an overall operating profit for the fourth quarter. But it will be the worst number in 17 years. And that’s without adjusting for inflation.

S&P calculates that operating earnings for the index now stand at $5.77 a share for the quarter, down 62% from the fourth quarter of 2007 and the lowest since the fourth quarter of 1992.

The magnitude of the plunge in operating results tells you that this is no ordinary recession. The worst year-over-year decline in S&P quarterly operating earnings during the 2001 recession was 39%.

Earnings are a function of sales, and sales were disastrous last quarter as consumers and businesses closed their wallets: Total revenue for the S&P 500 firms that have reported so far was down 9.8% from a year earlier.

Stimulus package, anyone?

-- Tom Petruno