Downward revisions to corporate earnings could be on the way in the months ahead, warn analysts at National Bank Financial in a new research note.

NBF reports that the ISM index for the non-manufacturing sector fell 4.7 points in February, “the largest monthly decline since September 2005 when hurricanes Katrina and Rita hit the United States. In fact, if we combine this result with that of the manufacturing ISM (which actually showed an improvement in February) our combo index was down to its lowest level since early 2003.”

“Waning economic momentum is taking its toll on earnings growth prospects,” NBF says, adding that bottom-up expectations for EPS growth on the S&P 500 have been revised down significantly in the last three months — by the most since May 2003. “Despite these revisions, it is worth noting that the bottom-up consensus continues to call for earnings growth in excess of nominal GDP in 2007 (6.3% vs. about 4.5%).”

“Given that profit margins are already at a record high on an economy-wide basis, we think that current expectations for earnings growth are still too high,” it says. “Expect more downward revisions from Wall Street analysts in the coming months.”