Earnings season unofficially kicked off on Wednesday night with aluminium giant Alcoa reporting earnings per share that topped expectations on revenue that missed estimates.
Overall, analysts have a downbeat forecast for earnings season, having cut expectations by 8% in the 3 months leading up to earnings season.
But this bar has been taken so low, companies might just be able to clear it.
In a report on Wednesday, Savita Subramanian at Bank of America Merrill Lynch notes that earnings estimates for S&P 500 companies in the energy sector have declined by 50% this year.
Excluding energy, however, earnings estimates have declined 5%, a bit worse than the 3%-4% decline seen during most quarters, but Subramanian noted that in recent weeks about 70% of companies have beat on earnings as expectations have begun falling more slowly.
Subramanian added that Bank of America’s GLOBALcycle indicator shows global growth tracking at around 3.5%, and with 60% of multinationals surprising on the upside, there appears to be potential for earnings to beat expectations by about 2%.
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