By at least one measure, corporate earnings are the best in nearly a quarter-century. However, the stock market is not enthused!
Rather than rally on the back of upbeat results, the main equity benchmarks have sulked lower.
According to Thomson Reuters I/B/E/S, of the 343 companies, or about 70%, of S&P 500 members that have reported earnings to date, 79.9% have reported earnings per share that were above analysts’ expectations, putting the season on track for the highest earnings beat rate on record, going back to 1994.
So far, the first-quarter growth rate for EPS is 22%, compared with consensus earnings growth of 16.3% as of April 12, according to Lindsey Bell, investment strategist at CFRA. That outperformance is underpinned by some of the most highly valued companies, including JPMorgan Chase & Co[1]. JPM, -0.79%[2] Apple Inc[3]. AAPL, +4.42%[4] Facebook Inc[5]. FB, +1.27%[6] and Amazon.com Inc[7]. AMZN, -0.80%[8]
Bell said recent quarterly results have seen outperformance of about 3 to 4 percentage points better than analysts’ consensus estimates on average, compared with the 5.7 percentage points earnings are currently running ahead.
Bell said what’s really impressive is that expectations were already lofty and this quarter represented the first in which the bar was raised to factor in fiscal stimulus measures such as corporate tax cuts, which took effect in late 2017.
“It’s significant because we haven’t seen a change like this from the very beginning to (the) start of reporting season,” Bell said. She said the numbers have been cut for each quarter going back to the second quarter of 2006.
So why has the stock market not snapped out of its doldrums? The Dow Jones Industrial DJIA, -0.72%[9] has shed about 1.8% since April 12, just as first-quarter earnings season was about to get under way. The S&P 500 index SPX, -0.72%[10] has lost 0.8%, while the technology-centric Nasdaq Composite Index ...