An Interesting Start to Earnings Reporting Season
Alcoa’s earnings report is typically considered the unofficial start of earnings reporting season. The company is due to deliver results today after the U.S. equity market closes. However, according to data compiled by Factset, 22, or 4.4 percent, of the 505 companies that are currently part of the S&P 500 have already reported first quarter earnings.
Though the sample is small, results so far are interesting. Seven consumer discretionary companies have reported an average 18.6 percent gain in earnings per share. That’s a strong start.
When all is said and done, consumer discretionary stocks are expected to post earnings-per-share growth of just under 10 percent. That compares quite favorably to consumer staples and tech stocks, the two other sectors where some companies have already reported. Six consumer staples companies have reported average growth of 6.3 percent, a solid gain, but that group is expected to post a drop of 2.6 percent when the tally is complete.
The tech sector has also had six companies report and the average earnings-per-share growth there is -18.7 percent. For this group, the final tally is expected to be -7.1 percent.
All in all, the S&P 500 is expected to show a 9.3 percent drop in earnings per share for the first quarter, with declines expected in seven of the 10 sectors – and the most severe declines expected in energy, materials, and financials. Only consumer discretionary, health care, and telecomm services are expected to post gains.
The good news is that these are first-quarter results, meaning they are past performance and stock prices generally reflect forward expectations. While the economy does remain at risk, if economic activity reaccelerates, then second quarter earnings – which are being generated right now – may show a rebound from what is likely to be weak first quarter results.
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Robert Hughes
Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.
