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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:
With a little over two-thirds of the Q1 earnings results in already, we can say with a fair degree of confidence that the overall earnings picture remains resilient and stable, with companies not only beating estimates but also providing a reassuring-enough outlook for an otherwise uncertain macro environment.
Through the morning session of May 3rd, we have seen Q1 results from 343 S&P 500 members, or 68.6% of the index’s membership. Total Q1 earnings for these companies are down -1.6% on +4.1% higher revenues, with 77.6% beating EPS estimates and 74.3% beating revenue estimates.
Earnings aren’t great, but they aren’t bad either, given the uncertain macro backdrop and weak sentiment. Importantly, the tone and substance of management commentary continue to be favorable enough, which is helping keep negative estimate revisions in check.
A significant driver of Q1 earnings outperformance has been better than expected margins, with net margins for the companies that have reported shrinking 74 basis points (bps) vs. 142 bps in the preceding period. The Tech sector has really stood out regarding the stabilization of its margin outlook.
Corporate profits continue to defy the skeptics, with an above-average proportion of the companies that have reported results not only beating estimates but also providing reassuring enough guidance for the current coming quarters.
We are not suggesting that earnings are great, because they are not. After all, earnings growth is on track to be negative for the second quarter in a row, with the trend of declining profits expected to continue in the current period.
That said, the fear of all-around downbeat guidance and management commentary still remains just that, a fear. As a result, we continue to elude the earnings cliff that the market bears have been telling us about for a while.
Perhaps it’s only a question of time, with the day of reckoning only being deferred to the second half of the year. But for now, at least, we can feel relieved that the earnings picture is good enough.
There are so many examples of bellwether companies showing that while growth has come down and conditions remain challenging, they are still profitably operating. Consumers are still spending, though there are signs of weakness at the margin.
Strong results from the likes of Pepsi (PEP - Free Report) , Chipotle Mexican Grill (CMG - Free Report) , United Airlines (UAL - Free Report) , and many others show that consumer demand is holding up despite these companies implementing pricing increases.
Then there is Microsoft (MSFT - Free Report) , whose Q1 results and outlook for the current period, particularly in the cloud space, go some ways towards easing fears about enterprise software spending.
Regular readers of this earnings note know that earnings expectations have been steadily coming down since last year in response to a moderating economic outlook as a result of tighter monetary conditions.
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Analyzing the Q1 Earnings Landscape
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:
Corporate profits continue to defy the skeptics, with an above-average proportion of the companies that have reported results not only beating estimates but also providing reassuring enough guidance for the current coming quarters.
We are not suggesting that earnings are great, because they are not. After all, earnings growth is on track to be negative for the second quarter in a row, with the trend of declining profits expected to continue in the current period.
That said, the fear of all-around downbeat guidance and management commentary still remains just that, a fear. As a result, we continue to elude the earnings cliff that the market bears have been telling us about for a while.
Perhaps it’s only a question of time, with the day of reckoning only being deferred to the second half of the year. But for now, at least, we can feel relieved that the earnings picture is good enough.
There are so many examples of bellwether companies showing that while growth has come down and conditions remain challenging, they are still profitably operating. Consumers are still spending, though there are signs of weakness at the margin.
Strong results from the likes of Pepsi (PEP - Free Report) , Chipotle Mexican Grill (CMG - Free Report) , United Airlines (UAL - Free Report) , and many others show that consumer demand is holding up despite these companies implementing pricing increases.
Then there is Microsoft (MSFT - Free Report) , whose Q1 results and outlook for the current period, particularly in the cloud space, go some ways towards easing fears about enterprise software spending.
Regular readers of this earnings note know that earnings expectations have been steadily coming down since last year in response to a moderating economic outlook as a result of tighter monetary conditions.