Earnings Season update for February 26th

Earnings Season update for February 26th 

Bottom Line: We've had a record low period of negative volatility give way to the most volatility we've had in 8+ years. We've had a correction and a recovery within the month of February. The constant has continued to be earnings. They were great at the start of the season and they're great as we're heading down the home stretch of it.   

Through last week, nine of every ten companies had reported their results for the fourth quarter. The expectations were high for America's companies. The average estimate for earnings growth is 10.8 percent year over year and all eleven sectors of the US economy are projected to have grown. So, are we getting the follow through?      

  • 90 percent of companies have reported            

  • 74 percent have reported positive earnings surprises and 78 percent have topped sales targets        

  • Earnings growth has been 14.8% percent!      

Two notes: 

  • 14.8% earnings growth is the best since the 3rd quarter of 2011  

  • 78% of companies topping sales estimates is the best since 1998 

Expectations were high and once again companies are crushing them. For folks wondering and worrying about whether something was wrong all of the sudden due to the correction, it's actually quite the opposite. Earnings are the reason the market bounced back so quickly upon correcting. It's hard to keep stocks down when we have the extremely impressive growth and results we've seen coming in this quarter. 

As a bonus, the benefit of the tax cuts for the average American are now showing up in paychecks. As a reminder the average American will benefit from tax reform by 4%, or an extra $1,980 this year. Add in raises and the average net take home pay is 7%+ higher. With consumer spending adding up to be about 70% of the US economy - clearly there's lots of room for optimism still...     

 

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