This year's fourth-quarter earnings season should bear little resemblance to last year's. In the early days of 2009, the outlook was bleak, and major financial companies like AIG (NYSE:AIG), Citigroup, and Bank of America (NYSE:BAC) occupied truly shaky ground.

When the fourth-quarter 2008 reports had all shaken out, companies in the S&P 500 ended up reporting a truly staggering $23.25-per-share loss. Thanks in large part to that abysmal quarter, trailing-12-month earnings were a meager $14.88 per share.

The coming weeks should prove that the market has come a long way. While an estimated $8.56 in per-share earnings for the S&P 500 companies is still weak compared with the $20.24 in the fourth quarter of 2006, it's a huge jump from last year.

But does this mean that earnings season will be a flashing "buy" signal for investors? That's not quite so clear. At the dawn of 2009, the S&P was 21% lower than it is today. And as we probably remember all too clearly, the market fell even lower following that nasty fourth-quarter earnings season -- 41% lower than today's level, to be precise.

If fourth-quarter earnings shake out the way S&P prognosticators expect, trailing-one-year earnings on the S&P will be $44.50 per share, giving the S&P a trailing price-to-earnings ratio of 25.8. Anticipated forward earnings -- that is, earnings for all of 2010 -- don't look all that much more promising. Current expectations call for $45.50 of per-share earnings for the year, giving us a P/E of 25.2 by year's end if the S&P doesn't budge from today's level.

For Fools like me who like to take a longer-term perspective, the 10-year average P/E that Yale economist Robert Shiller likes to track doesn't scream "cheap," either. The 10-year average P/E is currently around 21, versus a long-term average of 16.4.

If you ask me, the opportunity now no longer lies in gritting your teeth and making a scattershot investment in an undervalued market. It's time to pick out individual opportunities that have great growth prospects, have been left behind by the market's recovery, or are simply strong, stable companies with reasonable valuations (and maybe a nice dividend to boot).

But the proof will be in the earnings pudding. If reporting companies burst out of the gates with much better than expected earnings, then it could be a sign that current estimates are too low, and fattened bottom lines will make valuations look cheaper.

Here are a few of the notable reports that could give us a sign of where we're headed:


Expected Report Date

Earnings per Share

Last Year's
Earnings per Share


Jan. 19



Caterpillar (NYSE:CAT)

Jan. 26




Jan. 26



Verizon (NYSE:VZ)

Jan. 26



Microsoft (NASDAQ:MSFT)

Jan. 28



Source: Yahoo! Finance.

Which companies are you paying special attention to this earnings season? Let me know in the comments section below.

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Fool contributor Matt Koppenheffer owns shares of Bank of America, but does not own shares of any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool. The Fool’s disclosure policy has never once been caught with its pants down. Of course, it doesn't actually wear pants …