Earnings Season Begins

Earnings Season Begins

David B. Armstrong, CFA Weekly Market Commentary

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Earnings season begins heating up this week as some major companies start to report first quarter (Q1) numbers.

While the start to earnings season is usually associated with Alcoa’s announcement, which will be on April 18th, there are some big names reporting before that – Financials such as Blackrock (BLK) will be Thursday after the close, then we see Citigroup (C), JP Morgan (JPM), PNC, and Wells Fargo (WFC) all on Friday morning. There are others too – Bed Bath & Beyond on Wednesday and Delta (DAL) and Rite Aid (RAD) on Thursday.

But it’s the next week where things get heavy – 134 companies in the S&P 1500 will report next week followed by two weeks of about 450 companies reporting each week.  Watch on April 26th when 173 companies report in a single day.

Expectations have been lowered since last quarter. This chart shows Bespoke’s “Net Earnings Revisions Spread”. Here’s how they define it:

“The net earnings revisions spread measures the number of companies that have seen positive analyst EPS revisions over the last month minus the number of companies that have seen negative revisions and expresses that net reading as a percentage of the total number of companies in the specific sector or group.” (emphasis mine)

Earnings Estimate Revisions

When expectations are high, they’re tough to beat.  When they are low…it’s easier.  The reading from January 29th, 2018 was the highest since May 7th, 2010 (see chart).

So…what’s there to expect? The current forecast calls for S&P 500 profit growth of 18.5% (Thomson Reuters, 4-10-18).

The expectation level for earnings is low relative to last quarter and I’m thinking that there is still some good news yet to come out of companies from the most recent tax bill.

Low expectations + good news = Dave thinking earnings season could result in some tail wind in equity investor sails.

Keep looking forward,

Dave  

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About the Author
David B. Armstrong, CFA

David B. Armstrong, CFA

David B. Armstrong, CFA, is a President and Co-Founder of Monument Wealth Management. Along with his role as the firm’s chief investment strategist and portfolio manager, Armstrong is viewed as an industry leader in several areas including innovative practice management, discretionary asset management, digital marketing and social media. Dave is the writer of Monument Wealth Management's weekly "Off the Wall" Financial Blog and Market Commentary, and is frequently sought after by journalists and event coordinators. Visit his full biography here.

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