Ed Yardeni on Q1 Earnings Season

Earnings! They are like an-ee-mal! Strong to quite strong.

At least that’s the consensus view headed into the season, which begins shortly.

Ed Yardeni explains how the outlook started the year burning bright – and has gotten even brighter…

As the week draws to a close, amazingly strong Q1 earnings reports are expected to start rolling in. Industry analysts polled by Thomson Reuters are expecting that S&P 500 companies’ earnings jumped by 18.5% y/y in Q1, with S&P’s frozen actual methodology showing expected growth of 17.0%. Thomson Reuters’ number comes down only slightly, to 16.7%, if Energy sector earnings—expected to pop—are backed out of the mix.

All 11 S&P 500 sectors are expected to see Q1 earnings grow y/y. Here’s the derby for the S&P 500 sectors’ expected Q1 revenues and earnings growth, (ranked by earnings): Energy (14.5%, 70.8%), Materials (11.6, 27.0), Financials (3.0, 24.6), Tech (13.9, 23.4), S&P 500 (7.3, 18.5), Industrials (7.5, 14.1), Telecom (4.0, 12.8), Health Care (6.4, 11.0), Consumer Staples (4.4, 10.7), Utilities (1.9, 9.8), Consumer Discretionary (6.5, 9.4), and Real Estate (6.9, 2.9).

Interestingly, energy stocks across the board have seen the most outlook increases of all the sectors. Ed notes that “The Oil & Gas Drilling industry’s forward earnings has turned positive for the first time since March 2016, and the Oil & Gas Exploration & Production industry’s forward earnings has improved by 66.6%”

I’m old enough to remember when oil and gas names couldn’t get themselves arrested on Wall Street. It’s almost as if expectations have a funny way of going too far in one direction and then setting up opportunities later on. Weird!

Source:

Yardeni Research