Angela Weiss / AFP / Getty Images
Earnings are strong. Not everyone is happy.
Nearly three-quarters of S&P 500 companies had turned in first-quarter results through Friday, according to FactSet, which in a note last week said that earnings for the index as a whole are on track—based on a “blended” number that reflects numbers already reported and Wall Street’s expectations for those that remain—to rise nearly 13% year-over-year.
Nevertheless, some investors remain cautious. Investors have so far bid up shares of companies that have reported guidance better than the Street expected, according to Bank of America research, but companies have been rewarded less than is typical for stronger-than-expected results, and misses have been more harshly punished than in recent years.
Bank of America stated that while the percentage of companies exceeding earnings expectations is higher than average, it is lower for sales.
Many companies are removing their forecasts in full. Cummins, the engine maker, cited uncertainty over the direction of Trump’s trade policy as the latest example. Other companies have adopted a different strategy, offering outlooks that include a variety of economic scenarios.
“Companies are getting nervous about the future—so much so that they’re pulling earnings forecasts in droves,” wrote Callie Cox, chief market strategist at Ritholtz Wealth Management, in a Monday email.
Goldman Sachs analysts noted last week that even those companies that don’t withdraw forecasts are cautious. They also noted that a higher-than-average percentage of companies who have provided full-year guidance kept the numbers they had previously published.
“We view this as a dynamic that is a reflection of [companies’] They wrote that some companies were hesitant to adjust their guidance because of the uncertainty surrounding tariff policies. “For instance, some companies noted on their earnings calls that they did not include the impact of tariffs in their most recent guidance.”
This could cause problems in the months to come, especially if businesses are spending money now to prepare for the effects of tariffs.
Analysts at Deutsche Bank wrote last week that a combination pre-buying, inventory rundowns and other measures should give companies an extra 1 to 2 months of buffer before tariff impacts begin to hit. "If sustained, we see the potential impact of the announced tariffs as large and likely to fall disproportionately on US companies.”
The Magnificent Seven results are now in. Only Nvidia (NVDA), however, remains. There are a lot of closely watched reports this week. These include numbers from Walt Disney, Advanced Micro Devices, and Coinbase Global.
