What We’ve Learned From Earnings Season
According to data from FactSet, more than 80 percent of the companies in the S&P 500 have reported first quarter earnings through this morning. Overall, earnings reports have been better than expected, with almost 72 percent beating analyst expectations. Despite the beats, earnings growth overall remains negative, with reported earnings per share down about 7.8 percent from a year ago.
As has been the case over the past few quarters, much of the decline is due to commodity related sectors, like Energy and Materials.
Among the other sectors, the key takeaways are that Consumer Discretionary, Telecommunication Services (mostly due to AT&T) and Health Care continue to post the strongest performance. Industrial company earnings are down 4.3 percent from a year ago as the strong dollar and slow global growth weigh on exports.
The biggest surprises from this earnings season are coming from Information Technology and Financials, both of which posted sharp declines in earnings, -9.5 percent and -13.1 percent, versus a year ago.
Perhaps the most important information coming out of this earnings season is the adjustments to future expectations. According to Thomson Reuters, expected earnings for the S&P 500 over the next few quarters are being lowered, however, expectations are still high for a solid recovery in earnings over the next year. That’s a positive sign for the economy and equity markets.
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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.Robert Hughes
