Unexpectedly Intriguing!
August 16, 2018

Every three months, we take a snapshot of the expectations for future earnings in the S&P 500 at approximately the midpoint of the current quarter, shortly after most U.S. firms have announced their previous quarter's earnings.

This time round, we find that the projected future for S&P 500 earnings has softened through the end of 2018, but has strengthened through the end of 2019.

Forecasts for S&P 500 Trailing Twelve Month Earnings per Share, 2014-2020, Snapshot on 10 August 2018

Compared to the previous quarter, a mixed picture.

Perhaps the biggest contributor to that downward adjustment in the near term expected future for earnings was Facebook (Nasdaq: FB), which TheStreet described as a "complete outlier" after they reported their earnings and outlook at the end of July 2018.

Earnings blowouts from Caterpillar (CAT - Get Report) and Amazon (AMZN - Get Report) look like the norm this earnings season, not the Facebook (FB - Get Report) earnings call meltdown.

"The tone on earnings calls remains positive - mentions of "better" or "stronger" relative to "worse" or weaker" is still above-average (despite being down from the last few quarters' highs), and mentions of optimism are also above average (and up from last quarter)," says Bank of America Merrill Lynch strategists.

Facebook's "Black Thursday" was in large part fueled by an earnings call littered with concerns about future growth rates.

We'll see how things change three months from now, with the fourth quarter of each year being historically the most popular period for when companies announce any significant changes in their future business outlook.

Data Source

Silverblatt, Howard. Standard & Poor. S&P 500 Earnings and Estimates. [Excel Spreadsheet]. 14 August 2018.

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