First - Earnings Season update for April 23rd

posted by Brian Mudd -

First - Earnings Season update for April 23rd  

Bottom Line: We started 2018 with companies weighing the benefits of tax reform, along with tariffs and rising interest rates after seeing record profits in 2017. Despite outstanding earnings which included 15% growth, with nearly 75% of companies exceeding their expected performance, we had a correction and near record volatility after more than a year of near record low volatility. In the six weeks since the end of the previous earnings season we've seen headlines driving the market more than fundamentals. We started to see signs last week that with the return of earnings season – we'd see the return of stock market performance that's at least considerate of fundamentals once again. So, after the first full week of the 2nd earnings season of 2018 what's going on? 

The expectations are super high for America's companies. The average estimate for earnings growth is 17.1 percent year over year. Here's where we stand so far... 

  • 17 percent of companies have reported              

  • 80 percent have reported positive earnings surprises (+6% qoq) 

  • 72 percent have topped sales targets (-5% qoq)       

  • Earnings growth has been 18.3% percent!        

Three notes:   

  • Earnings growth is the best since the 1st quarter of 2011    

  • Six of eleven sectors have raised guidance for the rest of 2018 based on earnings reports thus far 

  • Companies are exceeding – even extremely high – earnings estimates 

Expectations are 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 and continued volatility it's actually 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.   

We now have a pretty clear idea of the impact of the Tax Cut and Jobs Act on corporate America and the news is outstanding for investors. Until next week's update... 

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