Tuesday, May 12, 2015

Beating the Earnings Recession

A month ago, we talked about the possibility of an earnings recession, in which the aggregate earnings for the S&P 500 would have fallen for an entire calendar year. Now that possibility looks a bit more remote. According to FactSet, earnings growth for the first quarter of this year looks like it will come in positive, although just barely, at growth of 0.1 percent.

Earnings growth now looks positive for the first time since January. The reason is that companies are reporting earnings above the analysts' estimates for the first quarter at a lofty 6.4 percent, much higher than expected.

The five-year average  for beating earnings is 5.4 percent. If that 6.4 percent earnings-beating figure holds up for the entirety of the first quarter, it will mark the highest surprise percentage for a quarter since the first quarter of 2011, when it was an even 7.0 percent.

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