We are getting into the thick of a thin earnings season. Like most everything else, the way you interpret the data depends on your general world outlook. I freely admit to being an optimist, so I look at the number of companies exceeding expectations and I see a glass half-full. Other, more pessimistic types could easily argue that the glass is half-empty. Take a look at the data and decide for yourself.
Here's where things stand so far among the stocks that comprise the S&P 500 index. This data comes from Standard & Poors.
- So far 108 companies have reported first quarter earnings.
- These companies represent 30 percent of the market value of all stocks in the index.
- Operating earnings are:
+19.6%ahead of estimates,
-17.8%below last year's levels.
59 issues beat estimates; 45 issues missed estimates.
Of the companies that beat estimates, only 21 beat last year's earnings.
Despite the fact that these earnings appear on the thin side--especially when viewed next to last year's performance--it is important to recognize that a large number of companies are beating the pessimistic estimates of industry analysts. I see this as indication of a market and economy beginning to bottom out. Thought the negative comparisons to last year show that the recession is still with us, the positive comparison to estimates may indicate that things are beginning to improve.
In any case, if market performance is driven by expectations about future earnings, the fact that earnings are ahead of estimates provides justification for the stock market rally we have enjoyed since March 9th and points to the potential for the rally to continue.