Earnings Season update for May 14th

Earnings Season update for May 14th  

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, for the first quarter of 2018 – the news has been even better. Coming into earnings season the average estimate for earnings growth was 17.1 percent year over year. Here's where we stand so far...    

  • 91 percent of companies have reported                 

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

  • 77 percent have topped sales targets (flat qoq)          

  • Earnings growth has been a stunning 24.9 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    

  • Every week of results produced better earnings results  

Expectations were high and once again companies have crushed them. Each week of reporting season brought better overall results, indicating that there's momentum that's still building in our economy. We're now clearly seeing the impact of the Tax Cut and Jobs Act washing through in these reports and projections going forward. 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.   

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