Tahoe-Truckee Market Beat: First quarter earnings update
Special to the Sun
Due primarily to the strength in the US dollar, expectations for corporate earnings this quarter were not that strong.
Earnings for the S&P 500 were forecast to grow by 2 percent. The dollar’s strength has hurt our large multi-national companies, who get a lot of their revenue denominated in a foreign currency, like the Euro.
According to Thomsen Reuters, approximately 75 percent of S&P companies have reported so far, and 68 percent of those have reported earnings above expectations.
Revenues have been a different story, as only 44 percent have reported revenues above expectations.
Some companies have posted good increases in sales, yet seen their revenues decline from foreign currency exposure.
Since the start of the year, the Energy and Consumer Discretionary sectors have had the worst decline in earnings, and the utilities sector has posted the largest increase.
However, as of May 1, of the 24 Energy companies that had reported for the first quarter, 92 percent of them had beaten their estimate.
The best sector for earnings growth so far has been Health Care with a 17 percent growth rate. Financials are the next best with a growth rate of 15.3 percent rate of growth.
Energy has posted the largest decline in earnings even though most companies have beaten their estimate. Earnings in the Energy sector have declined by minus-54.5 percent, and that is due to the low price of crude oil.
Health Care also leads in revenue growth with a 9.9 percent rate and once again Energy has been the worst performing sector, with a drop of 33.6 percent in first quarter revenues.
Earnings reporting season is almost over, and the market has been performing quite well. The S&P 500 hit an all time record high of 2125.92 on April 27.
The NASDAQ finally breached its old record set way back in March of 2000, when it topped out at 5119.83 on the same day.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.