The predicted drop in earnings of S&P 500 for the first quarter has reduced. This week, several prominent names, including Microsoft Corp, reported optimistic figures. Refinitiv's data was revealed on Wednesday, 26th April as more companies reported their results.
As of Wednesday morning, the latest prediction was derived from the outcomes of 163 companies in the S&P 500 and estimates for the remaining constituents.
According to analysts, the year-over-year decline in S&P 500 companies' earnings for the first quarter is anticipated to be 3.2%, which is better than the earlier forecast of a 4.7% fall . At the start of April, analysts had predicted a 5.1% reduction in earnings for the quarter.
On Wednesday afternoon, Microsoft's stocks rose by 8%, providing the most significant boost for the S&P 500. Microsoft declared its quarterly revenue and earnings on Tuesday night that exceeded analysts' expectations.
Refinitiv reported that on average companies are announcing earnings that are 7.9% higher than expected.
Although the forecast has improved, the first quarter would still signify a second consecutive quarterly decline for corporate earnings, also known as an “earnings recession,” which previously happened when COVID-19 impacted corporate outcomes in 2020.
The Federal Reserve's vigorous interest rate hikes and the recent failure of two regional US banks have amplified concerns about a recession.
Refinitiv reports that companies are revealing earnings that are 7.9% higher than what was anticipated, which is higher than the 4.2% average seen in previous reporting periods.
Nick Raich, CEO of The Earnings Scout, said the results so far have been much better than what was expected, and, more importantly, “second-half estimates aren't getting cut”.
“There's no doubt that the underlying expectation trend has improved since October,” he said. “But can that persist?”
