Everything is still awesome - The end of earnings season edition
Bottom Line: Through Friday 95% of companies had reported their results for the third quarter that included hurricanes, Harvey, Irma and Maria. By the end of September thoughts of sustaining a 3% growth economy for the first time since 2005 were all but gone. So were the ideas that we'd have significant earnings growth for American companies. Both of those proved to be, happily, false.
First, we had the exceptional news of a 3 percent growth economy and lowest unemployment rate in nearly 17 years, despite more than $120 billion in negative economic impact from the hurricanes to the economy. Then the earnings estimates which had be slashed to just 3% growth for the quarter started be been blown out of the water. Earnings momentum and results have improved each of the past six weeks. Last week earnings for companies that'd reported had grown by 6.1% year over year. Here's where we are to start this week and we're wrapping up the season...
95 percent of companies have reported
74 percent have reported positive earnings surprises and 66 percent have topped sales targets
Earnings growth has been 6.2 percent!
Companies have more than doubled the growth estimates from the street coming into reporting season. That's great news and a powerful reason why stocks added gains through much of the season (though we've now had two slightly negative weeks in a row). As we're close to closing the door on earnings season, we'll be looking for future catalysts. The anticipation is that it'll be tax reform. But will Congress deliver? That's a big if and will likely determine if there's any additional upside from here over the short run. Without it, it's hard to imagine that stocks would have much additional upside over the short run. Many are nervous about the Senate's ability to come through - with reason. Fingers crossed but in the meantime 2018 should be the best year for wage growth since at least 2007. The record setting profits of 2017 should lead the way for follow through with meaningful raises entering the new year.