Tuesday, May 19, 2015

A Good News/Bad News Earnings Season

As we're grinding to the end of this quarter's earnings season, the results are kind of mixed. With reports in from 92 percent of the companies in the S&P 500, earnings per share are up just 2.1 percent from a year earlier. Even more troubling is that analyst forecasts show S&P earnings rising just 1.4 percent for the full year, which would be the worst year since the recession ended in 2009.

But the markets don't seem exceptionally nervous; the S&P 500 closed at another new record just this past Friday. One big reason for optimism is that the two primary problems affecting first-quarter earnings, low oil prices and the high dollar, have reversed course so far in the second quarter.

Crude-oil futures are up 37 percent from their 2015 low; that might not be so good for drivers, but it's great news for energy stocks. The dollar has fallen 8 percent against the euro from its March high, which is great news for exporters. All told, we might see earnings bounce back some in the second quarter.

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