The 5 Biggest Questions Going Into Earnings Season

FactSet analyst John Butters is out with a report previewing the Q4 2012 earnings season, which unofficially kicks off tomorrow when Alcoa reports earnings after the closing bell.

Earnings are currently expected to grow 2.4 percent this season, but Butters notes that this is down from the 9.2 percent growth that was expected at the beginning of Q4 on September 30.

In the report, Butters discusses five key concerns headed into the upcoming reporting period:

1. How bad is Europe? The eurozone continues to contract – in Q3 2012, EU-wide GDP fell 0.4 percent. This should lead companies to report lower revenue growth from businesses outside the U.S. in Q4.

2. What's the stronger dollar doing to revenues? U.S. companies should see any boost in revenues related to a weaker dollar dissipating – the dollar strengthened against the euro in 2012, taking away a bit of the advantage for American exporters.

3. How are China and the other emerging markets? While the developed world has struggled to grow, emerging market growth has also been slowing over the past year. Butters points to a statement from Nike's earnings release on December 20: "Excluding the impact of changes in foreign currency, NIKE Brand revenues rose 11 percent, with growth in all key categories, product types and geographies except Greater China."

4. What was the impact of Hurricane Sandy? The effects of Hurricane Sandy still linger in the U.S. economy, as evidenced by many recent economic data releases. Butters says companies will usually put a specific dollar amount on Sandy's impact, as FedEx, Paychex, and Bed Bath & Beyond all did in late December.

5. Did fiscal policy uncertainty really affect Q4? Butters writes, "It will be interesting to see if companies cite the uncertainty of the resolution to the 'fiscal cliff' through the month of December as an impediment to earnings growth for the fourth quarter, In addition, will companies comment on the potential negative impact on earnings for the current quarter of the fiscal uncertainty surrounding the upcoming debt ceiling and sequestration debates?" So far, most companies have yet to ascribe any specific impact to "fiscal cliff" uncertainty.

Alcoa reports earnings Tuesday after the closing bell to get things going. Follow the release LIVE on Money Game >

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