Corporate profit forecasts hit their gloomiest level since 2009 and have more room to fall, Bank of America says

• Companies still issuing profit forecasts are the most pessimistic they've been since the financial crisis, Bank of America said Monday.
• The bank's three-month guidance ratio, which compares the number of above- and below-consensus forecasts, slid to 0.3x in April, its lowest level since March 2009.
• Several firms are nixing guidance entirely, with nearly one-fifth of S&P 500 firms already suspending forecasts two weeks into earnings season.
• Estimates for full-year profit growth continue to fall as companies reveal how the coronavirus has harmed performance. Bottom-up expectations see S&P 500 profit growth falling 17% in 2020, though Bank of America forecasts a steeper 29% year-over-year decline.
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The few companies still issuing forward guidance aren't painting a rosy picture for corporate profitability, Bank of America said in a Monday note.

Nearly one-fifth of S&P 500 companies have suspended their profit forecasts as the coronavirus fuels unprecedented uncertainty. For the firms still forecasting next-quarter profits, guidance is at its gloomiest level since March 2009, the bank's analysts wrote.

The team used its three-month guidance ratio to track guidance sentiments, comparing the number of forecasts above and below consensus estimates. The metric is tracking at 0.3x in April after just two weeks of earnings announcements, the analysts led by Savita Subramanian wrote. Guidance outlooks are weakest in the consumer discretionary, industrial, and real estate sectors.

The ratio's average level since 2000 sits at roughly 0.7.

Read more: The manager of the best small-cap fund of the past 20 years explains why he's betting big on a consumer recovery — and shares his top 4 stock picks in the struggling sector

Capital spending is also sliding to its lowest since the financial crisis. Bank of America's three-month ratio for capital expenditure forecasts plunged to 0.8x versus the 1.4x average in April, its lowest point since September 2009. The analysts expect capital expenditure growth to flatten over the coming quarters as the US economy slowly reopens.

Expectations heading into earnings season were mostly lowered from their pre-virus highs, yet the first two weeks of reports suggest earnings growth still won't meet analyst hopes. Bottom-up estimates for yearly profit growth have slumped 17% year-over-year, Bank of America said, compared to the 3% decline expected at the start of April.

Bank of America now sees profits contracting 29% through the year as the coronavirus hits firms harder than anticipated. Negative news around the outbreak and its economic fallout will likely be loaded into first- and second-quarter reports before firms pivot toward recovery, the team added.

There's still time for earnings surprises to lift the dismal outlook. Roughly 40% of earnings reports are due this week across all 11 sectors, including giants like Apple, Amazon, and Facebook. Any results above expectations will likely drive larger-than-usual gains, the team wrote, mirroring the heightened alpha seen in 2009.

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