Earnings Season update for May 8th

Earnings Season update for May 8th 

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 from the fourth quarter of last year we had a correction and near record volatility after more than a year of near record low volatility.   

For companies that've reported so far in this season – the news has been even better. First, to set the stage...coming into earnings season the average estimate for earnings growth was 17.1 percent year over year. Last week was the biggest week for earnings of the season and here's where we stand so far...   

  • 81 percent of companies have reported                

  • 78 percent have reported positive earnings surprises (+4qoq)   

  • 77 percent have topped sales targets (flat qoq)         

  • Earnings growth has been a stunning 24.2 percent!          

Three notes:     

  • We're on pace for record earnings & record % of companies beating estimates   

  • Ten 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 were high and once again companies are crushing them. Each of the three full weeks of reporting season have brought better overall results. We're now clearly seeing the impact of the Tax Cut and Jobs Act washing through in these reports and projections going forward and there's lots of room for optimism.  

Market reaction over the short run is unpredictable but fundamentals matter most overtime and the fundamentals of our businesses are about the best they've ever been.  

Until next week's update...   

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