However, the high negative-to-positive company guidance ratio and other headwinds could make first quarter, 2013 earnings the trough for the earnings cycle, as opposed to the second quarter, 2012.
"As a result, the uncertainty over the first-quarter earnings growth and forward guidance will probably allow for a seamless transition of tension from March Madness to April Anxiety," continued Stovall. According to S&P Capital IQ, five out of the 10 sectors are expected to post year-over-year gains in the first quarter, led by telecoms (up 9.6 percent) and consumer discretionary (up 9 percent), while energy and industrials are estimated to see the biggest declines of 3.1 percent and 2.5 percent, respectively.
"Common beneficiaries include the low interest rate environment and continued improvement in the overall U.S. economy, while headwinds include more difficult comparisons as first-quarter 2012 year-over-year EPS growth increased 7.4 percent, the uncertainty surrounding the impact of tax increases, the end of the payroll tax holiday, and delayed tax returns," according to a note from S&P Capital IQ.
Barry Knapp, head of U.S. equities portfolio strategy at Barclays, sees earnings growth of 4 percent this year, compared to Wall Street consensus estimates for 8 percent.
For the first quarter reports, Knapp thinks companies have already lowered expectations.
"Like most of the earnings seasons, the bar is low enough for the current quarter. I think guidance will get knocked down… It got marked down during the last earnings season," he said.
And Knapp warned that companies that match or beat their earnings estimates may still see their stocks get hit if they don't make positive comments about the future, as companies are "priced for guidance getting raised."
Citigroup economist Steven Wieting is more optimistic about the first quarter reports, and he expects S&P profits to be up five percent.
"I'm expecting a very strong earnings season statistically...Positive earnings surprises in the first quarter have been stronger than the fourth quarter in ten consecutive years," he said, in a recent interview. "There' seems to be a downward bias in Q4 results and an upward bias in Q1."
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