Stocktake: Another bumper earnings season

The US earnings season is almost over and it’s been another bumper quarter. FactSet data show 81 per cent of companies beat analysts’ expectations, above the five-year average of 76 per cent.

Regarding revenues, 75 per cent topped estimates, above the five-year average of 67 per cent. Companies beat revenues by more than twice as much as usual.

Strong earnings are often fully baked into prices, but that wasn’t the case prior to the current quarter, with markets actually rewarding earnings surprises more than usual.

Last year's profits collapse has been fully erased, with earnings now back to their long-term trend. The question for investors, says Topdown Charts' Callum Thomas, is whether earnings can go "above and beyond" that trend.

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Here, the early data are less encouraging. Of the 67 companies to have issued guidance, 41 have issued negative guidance and 26 positive guidance. The percentage of companies issuing negative guidance is 61 per cent, exactly in line with its five-year average.

The earnings rebound has been the “easy part”, says Thomas. Things may get trickier from here.