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S&P 500 1Q Earnings In Review

Jun 05, 2018

Earnings for the S&P 500 started CY2018 strong with aggregate 1Q2018 earnings growing +24.63% Y/Y, outperforming consensus expectations of +10.30% growth. This translates to a +14.33% spread between realized and expected earnings. The +24.63% earnings growth rate was nearly 2x higher than earnings growth in 1Q2017 (13.92% earnings growth in 1Q2017). Ex-energy, earnings for the S&P 500 grew +22.44%. S&P 500 earnings growth excluding both financials and energy was +21.35%.

 

S&P 500 Earnings Growth Breakdown

Empty th

1Q2017A

1Q2018E

1Q2018A

2Q2018E

CY2018E

S&P 500

7.88%

10.30%

24.63%

18.83%

19.79%

S&P 500 (ex-Energy)

5.97%

9.02%

22.44%

15.53%

17.25%

S&P 500 (ex-Energy & Financials)

5.48%

9.49%

21.35%

15.03%

15.07%

 

Each of the 11 sectors in the S&P 500 reported 1Q2018 earnings that were higher than forecasted. The biggest outperforming sectors in the S&P 500 for 1Q2018, in terms of realized earnings growth relative to expectations, were energy, financials, and industrials.

 

S&P 500 Earnings Growth: Energy, Financials, Industrials

Empty th

1Q2017A

1Q2018E

1Q2018A

2Q2018E

CY2018E

S&P 500 Energy

34.52%

52.60%

96.49%

134.87%

95.62%

S&P 500 Financials

9.17%

7.10%

26.86%

17.67%

27.38%

S&P 500 Industrials

3.85%

8.51%

22.96%

12.88%

17.82%

 

While all the sectors in the S&P 500 outperformed expectations, there were some sectors that only narrowly exceeded Consensus. The S&P 500 real estate, consumer staples, and materials sectors posted realized-to-expected earnings spreads that were well below the S&P 500 average of +14.33%.

 

 S&P 500 Earnings Growth: Real Estate, Consumer Staples, Materials

Empty th

1Q2017A

1Q2018E

1Q2018A

2Q2018E

CY2018E

S&P 500 Real Estate

3.83%

7.34%

8.12%

5.75%

6.15%

S&P 500 Consumer Staples

1.97%

6.40%

10.00%

8.57%

10.89%

S&P 500 Materials

8.46%

39.63%

44.10%

44.36%

25.46%

 

Several companies posted first quarter earnings that simply blew out analyst projections. Some of the top outperformers were:

 

S&P 500 Stocks That Surprised

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1Q2018E EPS

1Q2018A EPS

1Q2018 Earnings Surprise

1D Stock Price Reaction

Amazon.com (AMZN)

$1.24

$3.27

163.02%

3.60%

Autodesk, Inc. (ADSK)

$0.03

$0.06

89.43%

-4.44%

TripAdvisor Inc. (TRIP)

$0.16

$0.30

86.88%

22.80%

MGM Resorts (MGM)

$0.28

$0.46

67.14%

-8.60%

Alphabet Inc (GOOGL)

$9.28

$13.33

43.62%

-4.77%

Boeing Co (BA)

$2.57

$3.64

41.75%

4.19%

Chipotle Mexican Grill (CMG)

$1.57

$2.13

36.07%

24.44%

NVIDIA Corporation (NVDA)

$1.46

$1.98

35.82%

-2.15%

Macy's (M)

$0.36

$0.48

34.79%

10.83%

General Electric (GE)

$0.12

$0.16

33.56%

3.93%

Caterpillar (CAT)

$2.12

$2.82

33.17%

-6.20%

Yum! Brands (YUM)

$0.68

$0.90

31.49%

-7.43%

 

Robust earnings growth is expected to continue in 2Q2018, though earnings are expected to decline from 1Q levels. Earnings are forecasted to grow +18.83% increase in 2Q2018, 5.80% below the growth rate in the first quarter. For the full year CY2018 earnings growth is expected to be +19.79%, which indicates a deceleration in earnings growth in 2H2018.