Around 60% of the S&P 500 companies have announced their Q1 financial results, and for the most part the numbers have beaten expectations.
“Through Friday (April 25), over 61% of all US companies have beaten consensus earnings estimates; while for the S&P 500 it’s closer to 75%, according to our friends at ISI Research,” noted Charles Schwab’s Liz Ann Sonders. “And, we’ve seen a lift to the top-line (revenue) beat rate over the past week: according to Bespoke Investment Group (B.I.G.), for all companies having reported, 55% have beaten revenue estimates; up from 50% the prior week.”
Then again, better-than-expected earnings tends to be the norm. Furthermore, analysts and investors had been slashing their expectations for earnings, so the bar was arguably set low.
Importantly, it’s worth noting that the unusually negative trend in earnings guidance may be ending.
“For ten quarters in a row, companies have been unwilling to offer up anything positive about their forward business projections,” noted Sonders. “We have seen a “negative guidance spread” (more companies lowering guidance than raising it) in each of the past ten earnings seasons.
“This season, though, the guidance spread has finally flipped positive, with the percentage of companies raising guidance outnumbering the percentage of companies lowering guidance by 2.3 points, as you can see in the chart below.“
Sonders remains bullish on stocks.
“With many macro indicators signaling a pickup in growth and no signs of a recession on the horizon, in our view the bull market is likely intact.”