Earnings Monitor: Reality bites

Now that we are slightly over halfway through Q1 earnings season, it would be useful to see what we have learned, and how market expectations have developed through this pandemic period.

Let's begin with the big picture. FactSet reported that the bottom-up consensus forward 12-month estimate fell -1.9% last week, and -18.3% since downgrades began seven weeks ago. I have been monitoring the evolution of forward 12-month EPS for several years, and this level of revision is extraordinarily high. In the past, the magnitude of weekly revisions was usually about 0.1%, and swings of 0.2% would be considered high. Now, revisions are an order of magnitude higher at 1% or more. In addition, estimates have been falling while stock prices have been rising.

Companies gave little in the way of earnings guidance during this earnings season. In fact, 47 companies withdrew their 2020 EPS guidance for the full year as management as uncertainty rose. However, there is a remedy for investors looking for greater clarity on the earnings outlook.

The full post can be found here.