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Q1 Earnings Growth Strongest in 7 Years

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Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>

Here are the key points:

  • Total Q1 earnings for the 154 S&P 500 companies that have reported results already are up +25.4% from the same period last year on +10.3% higher revenues, with 80.5% beating EPS estimates and 72.1% beating revenue estimates.
  • Except for the proportion of these 154 index members beating revenue estimates, which is tracking below the preceding quarter’s level, performance in Q1 is better than what we have seen in other recent periods in terms of growth and positive EP surprises.
  • Looking at Q1 as a whole, total earnings are expected to be up +20% from the same period last year on +8% higher revenues, the highest quarterly earnings growth pace in 7 years.
  • Earnings growth is expected to be in double-digit territory from the year-earlier level for 12 of the 16 Zacks sectors, including the Technology and Finance sectors. The Autos sector is the only one expected to show earnings declines in Q1.
  • Net margins are expected to increase 1.2 percentage points from the year-earlier period, with Finance, Technology, Industrials, Energy and construction driving most of the margin gains.
  • Energy sector earnings are expected to be up +61.2% from the same period last year on +15.9% higher revenues. Excluding the Energy sector, total S&P 500 earnings growth drops from +17.8% to +16.5%.
  • For full-year 2018, total earnings for the S&P 500 index are expected to be up +18.3% on +5.4% higher revenues. For full-year 2019, earnings are expected to be up +9.3% on +4.3% higher revenues.


We now have Q1 results from 154 S&P 500 members that combined account for 37.9% of the index’s total market capitalization. Total earnings for these 154 index members are up +25.4% from the same period last year on +10.3% higher revenues, with 80.5% beating EPS estimates and 72.1% beating revenue estimates.

The charts below compare the results thus far with what we have seen from the same group of 154 index members in other recent periods.

What these comparison charts shows are:

  • The earnings growth rate (+25.4%) for these 154 index members is more than double the pace that we have been seeing from the same group of companies in other recent periods.
  • The Q1 revenue growth rate (+10.3%) represents an acceleration from all other periods in the chart
  • The proportion of positive EPS beasts (80.5%) is modestly above what we saw in 2017 Q4 (79.2%), the 4-quarter average (76.5%) and 12-quarter average (74%).   
  • Revenue beats for these 154 index members at 72.1% is the only metric that is tracking below what we had seen from the same group of companies in the preceding period, but it remains above other historical periods.


The revenue growth picture was very strong in the preceding quarter and the Q1 results thus far represent an acceleration from that growth pace. We saw an unusually big proportion of companies come out with positive revenue surprises in the preceding quarter as well, which remains unsurpassed in the Q1 earnings season.  

The comparison charts on the next page focus on the evolving revenue picture for these 154 index members relative to what these same companies had reported in other recent periods.

 

What this discussion of Q1 results shows is that while growth remains very strong and a preponderance of companies are beating EPS estimates, revenue beats aren’t as numerous was the case in the preceding quarter. All in all, a very strong showing on the earnings front. 




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