By Caroline Valetkevitch
NEW YORK (Reuters) – The estimated decline in first-quarter S&P 500 earnings is getting smaller as more companies report results, Refinitiv data showed Wednesday, with a host of big names including Microsoft Corp reporting upbeat numbers this week.
Analysts now expect first-quarter earnings to have fallen 3.2% year-over-year for S&P 500 companies. That’s an improvement from Friday’s estimate, which was for a decline of 4.7%. Analysts had forecast a 5.1% decline in earnings for the quarter at the start of April.
The latest forecast is based on results from 163 of the S&P 500 companies as of Wednesday morning and estimates for the remaining components.
Shares of Microsoft were up 8% in afternoon trading Wednesday and the biggest positive for the S&P 500. Late Tuesday, Microsoft reported quarterly revenue and earnings that were stronger than analysts expected.
Some investors had been bracing for a downbeat earnings season after a sharp fall in estimates heading into the reporting period.
Nick Raich, CEO of The Earnings Scout, said the results so far have been much better than what was expected, and, more importantly, “second-half estimates aren’t getting cut”.
“There’s no doubt the underlying expectation trend has improved since October,” he said. “But can that persist?”
Recession worries have increased with the Federal Reserve’s aggressive interest rate hikes and the recent collapse of two regional U.S. banks.
In aggregate, companies are reporting earnings 7.9% above expectations, compared with a 4.2% average for the last reporting periods, according to Refinitiv.
Despite the improvement in the forecast, the first quarter still would mark a second straight quarterly fall for corporate earnings, a so-called “earnings recession” that last occurred when COVID-19 hit corporate results in 2020.
S&P 500 earnings fell 3.2% in the fourth quarter of 2022 from the year-ago period, which was more than the estimated 1.6% fall predicted by analysts on Jan. 1.
(Reporting by Caroline Valetkevitch; Editing by Alex Richardson)
