Earnings season is heating up this week as investors shift their focus from banking to other sectors of the economy. U.S. indices
closed higher on Monday as
stronger-than-expected Q1 results at Charles Schwab (
SCHW) outweighed
lower fee revenues and shrinking deposits at State Street (
STT), though the session was quite choppy. Bank of America (
BAC) and Goldman Sachs (
GS) will follow up with their quarterly figures this morning, before the
earnings parade brings out streaming heavyweight Netflix (
NFLX) after the bell, as well as EV leader Tesla (
TSLA) tomorrow.
Snapshot: Earnings for S&P 500 companies are expected to have declined 4.8% Y/Y in the first quarter, according to data from Refinitiv, marking the second consecutive drop in year-over-year earnings growth. While that would translate into the first "earnings recession" since the pandemic, it could be somewhat of a good sign. Inflation is coming down, which is weighing on pricing and profit margins, while the economy is still growing with many firms reporting strong top-line figures. A bigger problem could arise if executives start issuing downbeat forecasts or companies surprise investors with some serious or severe quarterly losses.
"The prior earnings recession started in 2020 Q2, lasting three quarters from start to finish. Today's earnings recession may also last three quarters if analyst expectations turn out to be correct," SA contributor
Lipper Alpha Insight writes in a
new article about the earnings recession. Analysts have also set the bar lower heading into earnings season by downgrading Q1 estimates, while
earnings growth contribution and weights will play an outsized role in determining S&P 500 sector direction.
Go deeper: "Q1 estimates have declined significantly heading into earnings season which may set a lower bar for corporations to beat analyst expectations and surprise to the upside. The quality of a beat will matter, as investors look to hear from company management on numerous themes, including the macro-outlook, health of the consumer, impact of higher input costs on margins, employee hiring (or layoffs), and future capital expenditure plans." (
2 comments)
No comments:
Post a Comment