Q1 Earnings

Investors are scratching banging their heads at the numbers. Why? Because, as illustrated above, the Q1 earnings reports of S&P 500 companies post a negative EPS and Revenue Growth. However, most institutions interpret this as a positive due to performance when benchmarked against expectations….? This is somewhat like lowering a basketball hoop to 7feet for a slam dunk contest.

As of Friday, nearly 92% of S&P 500 companies have published their quarterly earnings. Those earnings for Q1 are trending to a 5.4% slide, which is about 2% ahead of the original earnings season expectations.

clockThe revenue and earnings beat rates of 52% and 72% have helped raise the overall tide of all S&P 500 companies from -7% to -6%. Revenue remains on pace to -1.4%, but shows an expanding upside in the reflection of earnings. Many analysists are aiming for a rise (excluding energy) in Q2 even with energy dragging those sectors.

Zacks.com reports: “While growth remains problematic, actual results are turning out to be less bad relative to the low levels to which estimates had fallen ahead of this reporting cycle. More companies are coming out with positive surprises for both earnings as well as revenues” (1).

The trillion-dollar question is whether earnings will continue to trek back into positive territory. Many investors look to the beat rate as the impetus for the current bull market, therefore watching that number will be an important factor when considering market momentum as well as the institutional mind-state.

Stay sharp and let me know if you have any comments or questions!

(1) http://www.zacks.com/commentary/79401/low-expectations-helping-q1-earnings-picture