As Goldman Sachs' chief U.S. equity strategist rightly pointed out in a client note last week: "As investors attempt to gauge the depth of final demand in the economy, market focus will shift to top-line results. Firms will have to report strong [third-quarter] revenue and positive top-line surprises ... for equities to resume their upward trajectory." In that context, third-quarter results from the granddaddy of bellwether companies -- General Electric (NYSE:GE) -- were hardly reassuring for investors who are banking on the stock rally to continue.

Bottom line: mixed
Earnings from continuing operations came in at $0.22 per share, $0.02 ahead of the analyst consensus figure. Not surprisingly, GE's lending arm was the worst drag on performance, with an 87% year-on-year drop in profits. The standout segments were Energy Infrastructure (+11%) and NBC Universal (+13%).

Top line: unambiguous
However, the top line clearly highlights a weak economy, with every company segment recording a year-on-year revenue decline; the best performer, Energy Infrastructure, experienced a 9% drop. All in, GE's revenues fell 20%, missing the consensus estimate by 4%. These numbers point to a U.S. economy that is still struggling mightily, and they are consistent with many companies' experiences.

Indeed, of the 131 firms in the S&P 500 that have reported fiscal-third-quarter results, 57% missed their consensus revenue forecast, including bellwether companies such as:

Company

Q3 Revenue Miss (Actual vs. Consensus Estimate)

Q3 Revenue Miss
(Actual vs. Low Estimate)

Air Products & Chemicals (NYSE:APD)

(7.5%)

(4.8%)

Dell (NASDAQ:DELL)

(6.8%)

(1.3%)

FedEx (NYSE:FDX)

(6.3%)

(1.4%)

Campbell Soup (NYSE:CPB)

(6.0%)

(0.8%)

Microsoft (NASDAQ:MSFT)

(3.2%)

0.4%

Procter & Gamble (NYSE:PG)

(2.4%)

0.0%

Source: Author's calculation based on data from Capital IQ, a division of Standard & Poor's.

Note that the table contains cyclical stocks (Air Products, Dell, FedEx, and Microsoft) and defensive stocks (Campbell Soup and P&G), and that four of the six companies missed even the lowest analyst estimate.

GE and the market rally
I have written multiple times in these columns that the market's current valuation implies a robust recovery for which there is scant evidence. Don't look for it in GE's earnings report -- it isn't there.

As we emerge from the recession, this is exactly the time to buy these stocks.

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Alex Dumortier, CFA, has no beneficial interest in any of the companies mentioned in this article. FedEx is a Motley Fool Stock Advisor recommendation. Dell and Microsoft are Motley Fool Inside Value selections. Air Products & Chemicals and Procter & Gamble are Motley Fool Income Investor picks. The Fool owns shares of Procter & Gamble. Try any of our Foolish newsletters today, free for 30 days. Motley Fool has a disclosure policy.