Mid-Week Notes Feb. 13th 2019
Slow Ride – Q4 Earnings Solid but Growth Set to Stall in Q1
Q4 S&P 5001 earnings are expected to rise 16.5% from a year ago (as of Feb 12, with 69% of companies having reported – Refinitiv).
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Most companies have topped analyst forecasts.
Q1 hits a wall
FactSet and Refinitiv are forecasting a decline of just under 1% in S&P 500 profits during Q1.
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Forecasts issued by firms have been less optimistic.
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Profit margins appear to be coming under pressure amid higher costs.
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Global growth has slowed.
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Falling energy prices are pressuring energy earnings.
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December’s steep selloff may be encouraging a more aggressive reduction in Q1 estimates by analysts.
Investor’s Corner
Historically speaking, falling guidance has been positive for stocks over a shorter period (Bespoke). Expectations have been lowered and the hurdle is easier to top.
When profits are surging and corporate guidance is strong, too much good news can get built into stock prices. Any disappointments may take a toll.
One caveat – if U.S. growth were to stall, we’d likely see further downward profit revisions, creating additional market headwinds.
Created 2019-02-13 22:25:25
