Most US companies have now reported first-quarter results, and they show profit growth is picking up. Earnings per share for companies in the S&P 500 now appear to be up 5.2% from a year earlier, according to FactSet, better than the 3.4% analysts expected at the end of March and marking the strongest growth in nearly two years.
Source: Wall Street Street
There is a world of difference between a slightly weaker labour report and the types of job losses that could push the economy into a recession. Surveys suggest corporate sentiment is picking up. And as you can see below, executives are saying the “R” word far less often.
Source: Wall Street Street
Company results coming in ahead of the estimates is a regular occurrence. More unusually, analysts also spent last month lifting their current-quarter estimates. They now expect second-quarter earnings per share to gain 9.8%, compared with 9% at the end of March. The last time analysts spent the first month of a quarter raising rather than lowering earnings estimates was during the fourth quarter of 2021, according to FactSet.
Corporate profits are important because they show the US economy continues to do well. While some other economic indicators, such as consumer-sentiment readings, have been downbeat, and inflation has ticked up, a strong US profit performance typically points toward continued expansion.
The drift higher in earnings estimates might be because companies are upbeat themselves. Among companies in the S&P 500, the term “recession” showed up in just 100 transcripts of earnings calls, investor events and conferences recorded in the first quarter, according to FactSet. That was down from 302 in the first quarter of 2023, and the fewest in two years.
And surveys of corporate sentiment have picked up. The Business Roundtable’s index of chief executive officers’ economic outlook rose to the highest level in the first quarter since the second quarter of 2022.
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