NEW YORK - Look for a lot of winners when companies report their first-quarter earnings.
The companies in the Standard & Poor’s 500 index have surpassed analysts’ profit expectations for two years, or eight straight quarters. Some analysts say they will make it nine straight this earnings season, which begins today.
“The longer it persists, the more meaningful it is,” said Adriana Posada, senior portfolio manager with American Beacon who oversees $18.8 billion in mutual fund and pension assets. “There’s a lot more confidence that the economy is in fact improving when earnings continue to surprise” with better-than-expected results.
Credit Suisse analysts wrote in a recent report that they expect companies in the S&P 500 will report total earnings per share of $22.66. That’s 3 percent above what analysts across the industry were expecting at the end of the first quarter. Over the last eight quarters, earnings have beaten expectations by an average of 7 percent.
The difference may sound small, but stocks are priced on the assumption that earnings will meet expectations. If results beat forecasts, expect stocks to go up.
Last earnings season, for example, timber company Weyerhaeuser Co. jumped 3 percent the day it reported adjusted earnings per share of 10 cents. That was double analysts’ expectations.