Feb 5, 2019

Wall Street scales earnings expectation way back

Data: FactSet; Chart: Axios Visuals

After months of downward revisions, analysts now expect the S&P 500 to post a year-over-year earnings decline in the first quarter, according to FactSet.

State of play: As recently as Sept. 30, analysts predicted the earnings growth rate for the current quarter would hit 6.7%. If their estimates prove to be true, it would be the first year-over-year contraction of S&P earnings since the second quarter of 2016.

Yes, but: Companies are up against a high bar, thanks to a boost from corporate tax cuts last year.

  • Still, CEO warnings about a global economic slowdown, the trade war and margin pressures has led analysts to curb expectations.
  • Earnings growth in the fourth quarter is on track to hit 12%, with about 46% of S&P 500 companies having released quarterly results so far.

The bad news: As more companies release soft guidance, expectations for first quarter earnings — and the rest of the year — may only get bleaker.

  • "We wouldn't be surprised if every quarter this year ends up in negative territory,” analysts at Morgan Stanley wrote in a recent note.

Go deeper

The S&P 500 could be overvalued

The New York Stock Exchange on Jan. 8. Photo: Xinhua/Wang Ying via Getty Images

The S&P 500 is too rich on a number of levels, according to calculations in a new paper from Ned Davis Research that examines the index's price to earnings, profits and price to sales.

What's happening: Not only is the benchmark stock index's current P/E ratio "well above fair value," S&P companies' prices relative to sales is at a record high, “well in excess of what they were in 2000 or 2007 at those peaks,” Ned Davis, the company's senior investment strategist, says in a note to clients.

Go deeperArrowJan 9, 2020

Andrew Yang's campaign says it raised $16.5 million in Q4

Photo: Frederic J. Brown/AFP via Getty Images

Andrew Yang's 2020 presidential campaign said Thursday that it raised $16.5 million during 2019's fourth quarter, reports the New York Times.

Why it matters: It's Yang's best quarter yet, topping the $10 million he raised in the third quarter, and is likely to put him among the top fundraisers in the crowded Democratic field.

Go deeperArrowJan 2, 2020

Middle East tensions could spark a big year for defense stocks

Data: Money.net; Chart: Axios Visuals

Defense sector stocks have predictably seen major buying since the killing of Iran Gen. Qasem Soleimani, in particular Northrop Grumman and Lockheed Martin.

Why it matters: The gains may not be temporary, analysts say.

Go deeperArrowJan 8, 2020