Monday, May 19, 2014

The Good News From Earnings Season

The good news for the first-quarter earnings season – which ended last week – was that more companies upgraded their earnings guidance than lowered it. In other words, most companies indicated prior to their earnings reports that their status was likely to be better than originally thought. That’s the first time a majority of reporting companies have done that since the third quarter of 2011.

That's one main reason that earnings, on the whole, surprised on the upside. As of April 1, the Wall Street consensus was that the S&P 500 would report earnings growth of just 0.4 percent. In the end, the 500 companies in the index reported growth of 3.4 percent.

There was one dark spot: the financial sector, which was the only one of the ten industry sectors in the S&P 500 to do worse than expected. Back on April 1, the consensus was that the financial would report a 2.9 percent drop in earnings growth.  By the end of earnings season, the actual number came in at a drop in earnings growth of 7.8 percent.

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