FactSet Earnings Insight: 2019 First Quarter Earnings in Review

The first earnings season of 2019 comes to a close with 90 percent of companies in the S&P 500 reporting.As FactSet continues to update its "FactSet Earnings Insight" report, here is a snapshot of 2019 Q1. Results were mostly positive as 76 percent saw a positive EPS surprise and 59 percent reported positive revenue surprise. While the current reports were somewhat optimistic, firms see negativity in the second quarter of 2019 as 65 reported negative EPS guidance and only 17 reported positive EPS guidance.

From FactSet

FactSet points out that there were concerns that a strong dollar and trade tensions would be a problem for earnings. Using FactSet Geographic Revenue Exposure data, the report shows that "globally exposed" S&P 500 companies which had more than 50 percent of sales outside of the US announced lower earnings and revenue growth. The trend was significant on the earnings side with the aggregate earnings of globally exposed firms dropping -12.8 percent while the earnings aggreage for S&P 500 firms with less than 50 percent of sales outside the US grew 6.2 percent.

The sector that showed the strongest earnings surprises was Consumer Discretionary. Aggregated, the sector saw a 20.6 percent surprise. Although, the sector aggregate included an extremely strong earnings beat from Amazon.com (AMZN) which reported EPS of $7.09 topping the estimate of $4.71. The Communications Services sector was the only that saw an earnings aggregate negative surprise at -4.0 percent. Facebook (FB) and Alphabet (GOOG) weighed on the sector after reporting strong EPS misses.

The market was not friendly to companies over the first quarter earnings season. FactSet reports that on average positive earnings surprises were rewarded less than negative earnings surprises were punished. Overall, the average price increase for a positive surprise was 0.8 percent and the average price decrease for a negative surprise was -3.5 percent. Both numbers were below their 5-year averages.

On the revenue side, the Communication Services sector saw two industries reporting double-digit revenue growth: Interactive Media & Services up 18 percent and Media up 12 percent. Two industries in the Information Technology sector were among the weakest, reporting revenue decline: Semiconductors

As mentioned earlier, outlook for the next quarter of earnings is pessimistic. With 79 percent of companies issuing negative guidance, analysts are expecting overall S&P 500 earnings to decrease 1.7 percent next quarter. Expectations don't pick up until the fourth quarter of 2019 where analysts see 7.4 percent growth (0.6 percent growth expected in the third quarter). Analyst revenue expectations are consistent over the next three quarters ranged between 4.3-4.6 percent. Despite the negative outlook, analysts expect S&P 500 growth of about 12 percent.


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