Despite exceeding earnings expectations, the current earnings season reveals a more nuanced picture for corporate America. This article analyzes the mixed signals coming from the S&P 500, highlighting the gap between headline numbers and the underlying trends. It delves into the concerns raised by lowered first-quarter forecasts, the impact of industry-specific challenges on bellwether stocks like Alphabet and Microsoft, and the analysts' cautious outlook on Qualcomm's future growth.
We're more than halfway through an earnings season that has left investors with loads to think about. First up, here are the numbers as of Thursday morning: S&P 500 companies that reported fourth-quarter results: 290+. Percentage of companies exceeding earnings expectations: 77.9% — above a 10-year average of 75%, according to FactSet. Year-over-year earnings growth from corporations that have posted their results: 17%. At face value, those figures show a very healthy corporate America.
However, a look below the surface reveals a more mixed picture. Data compiled by Nick Raich of The Earnings Scout shows that about two-thirds of the S&P 500 companies that reported through Wednesday morning also lowered their first-quarter earnings forecast by an average of 4%. 'Investors have been anticipating an economic boost from the Trump agenda, but so far, there has been no measurable improvement in S&P 500 EPS expectations,' Raich wrote in a note. Indeed, investors entered 2025 with expectations that President Donald Trump's second term would yield deregulation and lower taxes, translating into higher corporate profits. Some bellwether stocks have also seen some notable declines after reporting results lately. Take Alphabet for example. The Google parent this week posted fourth-quarter earnings that beat expectations. But a revenue miss coupled with concern around the company's plans to spend a whopping $75 billion in artificial intelligence sent the stock tumbling 7% — its biggest one-day loss since Jan. 31, 2024. Microsoft suffered a similar postearnings fate, losing 6% on Jan. 30 after light revenue guidance overshadowed fiscal second-quarter results that beat expectations. Bottom line: At around the halfway point of the reporting period, the season may not be as positive as the headline numbers indicate. Elsewhere Thursday morning on Wall Street, analysts raised concern over Qualcomm's growth trajectory after the chipmaker's latest quarterly report. 'We are impressed by Qualcomm's ability to maintain growth in a challenging smartphone environment, and are excited about content gains with the edge AI theme,' wrote Morgan Stanley analyst Joseph Moore. 'In addition, their growing autos opportunity is exciting and their share gains are notable. That being said, we see long-term handset risk with losing the Apple baseband and worry about Samsung concentration. We remain as the possibility of this caps the multiple potential, but we do admire the company's execution thus far.
Earnings Season Corporate Profits S&P 500 Alphabet Microsoft Qualcomm Economic Outlook Investor Sentiment
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