Companies may find hope among the earnings ruins

— -- Companies' profits for the first quarter are looking bleak, but investors who look closely might see something to be optimistic about.

Earnings from the 341 companies in the Standard & Poor's 500 that have reported first-quarter earnings are down 36% from the first quarter of 2008, S&P's Howard Silverblatt says.

But a closer examination gives investors a bit of hope that they've seen the worst for corporate profits. Some earnings bright spots might even provide some rationale for the market's recent rise. The Dow Jones industrial average rose an additional 44 points Friday to 8212 and is up 25% from its bear market low on March 9. More than $2.6 trillion in wealth has been returned to investors during that same period, Wilshire Associates says.

"Everyone is trying to look across the valley" to when corporate profitability will improve, says Dirk van Dijk of Zacks Investment Research. Among the things suggesting hope might be justified:

•Better-than-expected earnings are up. The 66% of companies beating estimates in the first quarter so far is just slightly better than the 63% that did so, on average, over the past eight quarters, Thomson Reuters says. But the total earnings reported by companies so far is 10.4% better than expected, the highest since Thomson started tracking it in 1994. That's a dramatic improvement from the last eight quarters, when earnings came in 9.5% below estimates on average.

•The downward spiral is slowing. Earnings fell at a slower clip in the first quarter than they did in the fourth quarter. And while analysts are still cutting expectations, they're doing so less frequently, van Dijk says. Analysts are cutting estimates three times for every two estimates they increase. That's an improvement from a month ago when the ratio of cuts to increases was 4-to-1.

•Hopes are rising for certain sectors. Analysts are more hopeful about earnings from tech, telecom and consumer companies, van Dijk says.

Despite potential positives, earnings experts overall are cautious. Analysts are still cutting 2009 earnings expectations and cut expectations for 2010 by 7% from two months ago, van Dijk says.