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Earnings: A Clearer Picture Emerges

S&P equity analysts expect results to recover in the second half of 2008, with the Consumer Discretionary and Financials groups leading the way

Approximately 90% of the companies in the Standard & Poor's 500-stock index have reported December-quarter earnings, and company managements have delivered whatever guidance for the year ahead that they are comfortable offering. S&P equity analysts now have a better handle on just how bad things were in the second half of 2007 and whether 2008 will look any better.

At the end of 2006, S&P equity analysts expected operating earnings per share (EPS) for the S&P Composite 1500 (comprised of the S&P 500, MidCap 400 and SmallCap 600 indexes) to advance 10% in 2007, a healthy follow-up to the 15% gain seen in 2006. Yet with 2007's results nearly final, we now find that EPS for the S&P 1500 actually sank by almost 4% on a worse-than-expected fallout from the housing, subprime, and credit crises.