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An Enormous Earnings Boost to Come From Unlikely Suspect…AIG

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Uninspired by projected earnings growth of 11% for the S&P500? According to John Butters of FactSet it's actually worse than you think.

"In the 4th quarter of 2010 AIG (AIG) reported a large loss, over $16 per share," the senior earnings analyst tells Breakout in the attached clip. "If you take AIG out of the equation (this year) that 11% growth rate for the S&P 500 drops down to only 4% growth."

Even assuming the usual 2/3 of companies reporting "beat" expectations, 4% is somewhere between "uninspiring" and "anemic." Butters says the primary sector culprit should come as no surprise to those who read through Alcoa's (AA) report: Basic Materials. The group suffered from dropping commodity prices throughout the quarter with estimates dropping accordingly.

As an economic "tell" input prices dropping bodes ill for a global recovery but it shouldn't come as any surprise to investors. Other groups with only mild shock value are Telecom Services, where juggernaut AT&T (T) has taken numbers much lower and the Financials where, frankly, the prospects and very business models of the space make it a wonder there are any estimates at all.

None of which excuses the clearly slowing earnings growth in corporate America. Butters says earnings in Q1 are currently estimated to grow at only 3% with an acceleration, of sorts, to 9% in Q2.

The value of these estimates is open to debate; it's notoriously difficult to accurately predict company performance during the most tranquil of times; obviously the globalized corporate world of today makes the job harder than ever. What's more, long time market types will tell you the relationship between earnings and stocks is hardly 1:1, a fact demonstrated by the rally to date in 2012.

Where do you see earnings coming in and will it actually matter to the stock market? Let us know in the space below or drop me a Tweet @Jeffmacke

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