Ask Matt: Will fourth quarter profits be better?

Q: Will fourth quarter profits be better?

A: Investors have just endured something they haven't had to deal with in awhile: falling profits. But they might as well get used to it.

Analysts are currently calling for companies in the Standard & Poor's 500 to post 3.7% lower adjusted profit in the fourth quarter, says S&P Capital IQ. If these estimates are right, investors will be looking at the first back-to-back quarterly earnings declines since at least 2009. The biggest culprit in the expected fourth-quarter profit drop is the energy sector again. Energy profits are expected to drop 66% in the quarter.

Seeing the drop in profit is tough for investors to swallow since the third quarter was already the toughest for profit in years. More than 450 companies in the S&P 500 have reported third quarter profit and earnings are down 1.6%. That's much better than the 4.8% profit decline analysts were expected on Oct. 1 for the third quarter, but drastically less than the 6.4% growth expected at the start of the year. If S&P 500 companies beat earnings forecasts by the same degree in the fourth quarter, profits would only decline by less than 1%. That would make it better than the third quarter, but still far from the growth investors might demand to justify stock prices.

Paste BN markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.