Most Stocks Lifted by Earnings Tides

Investors’ willingness to overlook earnings misses– and bid up shares of businesses that exceed earning expectations—is lifting the overall market. This according to a recent article in The Wall Street Journal. The article cites FactSet data showing that “shares of companies that topped analysts’ forecasts rose an average of 2% in the two days after reporting results, beating the five-year average of 1%.” It adds, “those that fell short have averaged a 2.1% pullback, below… Read More

Investors Punishing Earnings Misses the Most Since 2016

An article in Bloomberg reports that investors are penalizing earnings misses more than surprises by the widest margin in almost 2 years. Data gathered by Bank of America Corp. showed that in July, S&P 500 stocks that beat estimates outperformed by only 1.5 percentage points while those that reported earnings misses underperformed by 3.6 percentage points, the widest margin in seven quarters. “Living up to, let alone exceeding, Wall Street’s expectations has become a bigger… Read More

Earnings Are Booming But Stocks Are Not

A recent article in The New York Times says, “Investors are not rewarding American corporations for the best profits they’ve reported in years,” noting that 87 percent of companies reported second-quarter earnings surprises compared to the 70 percent average of the past five years. “Heading into 2018,” the article notes, “many market watchers pointed to corporate earnings to explain their rosy outlook for stocks. Yet, despite this performance, the stock market has been lackluster.” The… Read More

Stocks Aren’t Reflecting Improving Earnings

An article in Bloomberg addresses the question as to why “impressive corporate earnings results nor the synchronized pickup in global growth nor record levels of stock buybacks by companies has led to impressive gains in stocks.” According to the article, written by Allianz chief economic adviser Mohamed El-Erian, among the various potential reasons for this “decoupling,” there are three that “have an important implication for what likely lies ahead for investors”: “Positive developments are already… Read More

Stock Swings and Earnings

A recent article by Bloomberg columnist Nir Kaissar discusses the market’s increased volatility within the context of earnings. “More than a century of data,” he writes, “show that declines in the equity market most often precede slumps in earnings rather than the other way around.” Kaissar points out that although “companies are awash in profits” and Wall Street analysts lean on strong business fundamentals as comfort in the face of volatility, “fundamentals have little to… Read More

Buffett Says Tax Cut is Bullish for Stocks

The new tax legislation, which lowered the corporate tax rate from 35 percent to 21 percent, is “significantly altering how investors value equities and the market,” according to a recent CNBC article. On CNBC’s Squawk Box earlier this month, Warren Buffett said, “The tax act is a huge factor in valuation.” Simple math, said Buffett, says that the tax bill will result in a stock owner’s share of corporate profits increasing from 65 percent to… Read More

High-Yield Bond Prices’ May Forecast Equity Price Movements

Stock market participants “seeking an informational edge should keep their eyes on junk-bond prices on the heels of earnings reports,” according to a recent Bloomberg article. In a paper from the University of California at Berkley, assistant professor Omri Even-Tov shares findings stemming from analysis of bond returns following nearly 20,000 quarterly earnings announcements of 770 companies between 2005 and 2014. He writes, “The bond price reaction provides incremental explanatory power for post-announcement stock returns… Read More

Best Earnings Season Since 2011

As of last week, the majority of companies that reported earnings have beaten estimates, making this earnings season one of the best since 2011. This according to an article in last week’s Barron’s. The upbeat results, in many cases, apply to both the top and bottom lines, the article says, with much of the outperformance “driven by the big year-over-year jump in energy prices…as well as rising interest rates.” While first-quarter earnings are set to expand… Read More

Doll on the Markets Positives and Negatives on Today’s Market

In a recent Barron’s article, Nuveen Asset Management’s Chief Equity Strategist Bob Doll says that, despite disappointing first quarter results and apparent earnings struggles, consumer spending will be a healthy tailwind for the economy as a whole. He offers contrasting views of the current market situation:   Positive: Equity valuations don’t appear to be stretched; Earnings improvements should materialize in the coming quarters; The tumult in the oil market appears to be over; Investor sentiment… Read More

Good Strategies Look Beyond Earnings

Whether it’s talk about earnings growth or earnings estimates or price/earnings ratios, stock market news is usually filled with discussions of corporate earnings. But in his latest for Seeking Alpha, Validea CEO John P. Reese says that good investing goes beyond looking at earnings-related metrics. “Earnings don’t always tell the whole story,” Reese writes.  “In fact, oftentimes other metrics can provide an even better gauge of how a company or the market is doing. The… Read More