We've talked before about the difference between companies reporting strong revenue numbers and those reporting strong earnings numbers. Businesses can bolster revenue by slashing costs, such as inventories and headcount, but the only way to really boost your earnings is by selling more product. So especially in turbulent times such as these, earnings is the number you want to keep your eye on.
There was some concern that the market rally had been fueled by budget-cutters, but now we've seen a bona fide trend on the other side. According to the business-news service Thomson Reuters, 81 percent of the 199 S&P 500 companies that have reported results this quarter have beaten those estimates. In a typical quarter, 61 percent of companies beat their earnings estimates - which tells you something right there. Most earnings estimates come in low to begin with, so you can expect a little good news - and a stock pop - on earnings report day.
But this quarter has been different. If that 81 percent figure stays that high, it would be a record high. In total, earnings have come in 18 percent above the analysts' estimates so far this quarter.
As you can see, we've still got 60 pwercent of the S&P 500 yet to report this quarter, but so far, we're sitting mighty pretty indeed.
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