1Q Earnings Parade Is Over
- By John Tierney
- Sign-up to discuss on Slack
- 4 min read
Summary
- 1Q earnings season is now largely over. Earnings beats came in at 4.6%, down slightly from 5.6% last quarter.
- Analysts continue to project forward earnings at $227.28, or a hefty 13.6% above trailing earnings.
- We expect them to start trimming projections as 2Q earnings season starts. We expect equities to trend lower at this happens.
This article is only available to Macro Hive subscribers. Sign-up to receive world-class macro analysis with a daily curated newsletter, podcast, original content from award-winning researchers, cross market strategy, equity insights, trade ideas, crypto flow frameworks, academic paper summaries, explanation and analysis of market-moving events, community investor chat room, and more.
Summary
- 1Q earnings season is now largely over. Earnings beats came in at 4.6%, down slightly from 5.6% last quarter.
- Analysts continue to project forward earnings at $227.28, or a hefty 13.6% above trailing earnings.
- We expect them to start trimming projections as 2Q earnings season starts. We expect equities to trend lower at this happens.
Closing Out the Season
With 499 companies in the S&P 500 having now reported 1Q earnings, we can declare this earnings season over. Earnings beats came in at 4.6%, down slightly from 5.6% last quarter.
With Friday’s sharp selloff, the S&P 500 is now trading on top of fair value based on analysts’ forward earnings projections. Analysts continue to project forward earnings at $227.28, or a hefty 13.6% above trailing earnings.
Despite a fairly steady drumbeat of cautious outlooks for the rest of 2022 from many companies, analysts have yet to start trimming their year-ahead earnings forecasts.We expect that will start happening as the 2Q earnings season kicks off in about a month.
Barring some major new shock, we expect equities to continue trading in a volatile range around present levels. As earnings projections are cut, we expect equities will trend lower. The risk here is new developments cause equities to lurch lower, ahead of earnings.
Only three SPX companies report this week.
Monday
- Oracle (ORCL) should confirm a trend of software companies reporting solid earnings. The ongoing labour shortage is causing more companies to invest in software products to automate more business practices.
Thursday
- Likewise, Adobe (ADBE) should be well positioned to report good earnings.
- Kroger (KR), operator of some 2,725 grocery stores will be closely watched for information about how consumers are coping with sharply higher prices. About 60% of its locations also offer gas so it will be interesting to see how margins on fuel sales are doing as energy prices keep spiking higher.