First Quarter Earnings Preview – April 15, 2020
Q1 earnings season is unofficially getting underway this week.
The brunt of the damage from the COVID-19 pandemic may not be felt until the second quarter, but problems are expected to surface in Q1.
Analysts are ratcheting down expectations for S&P 500 profit growth (vs. one year ago)—from +6.3% on January 1, to -4.7% on April 1, to -12.3% as of April 14 (Refinitiv).
- During the economic expansion, analysts were too conservative, and profits regularly exceeded expectations.
- The opposite may be true today, as analysts may be too slow in bringing down forecasts.
- Guidance from companies may be vague given the uncertainty surrounding COVID-19 and its economic impact.
Do Q1 profits matter?
The steep selloff in March indicates investors were already bracing for a weak Q1, and investors may look past the numbers.
Despite the uncertainty, the Street will also be looking for any guidance.
Investor’s corner
Uncertainty and big swings in the major averages, both up and down, are likely to continue in the near term.
The rally off the March 23 low for the S&P 500 Index2 suggests investors are growing a little more confident the economy will find a bottom in Q2. Credit massive fiscal and monetary stimulus, and signs new cases may be peaking in the U.S.
While more government support may be needed, much will depend on the path of the virus, and the reopening of the economy.
Created 2020-04-15 14:19:13
