US companies are leaping above expectations on first-quarter earnings, giving investors stronger confirmation that profit growth will be able to support the market this year.
A big piece of that growth is coming once again from technology and growth companies, which suggests greater durability in companies that underperformed more economically focused value names for months.
Earnings are rebounding from last year’s pandemic-fuelled lows.
With results in from more than half of the S & P 500 companies, earnings are now expected to have risen 46% in the first quarter from the previous year, compared with forecasts of 24% growth at the start of the month, according to IBES data from Refinitiv.
About 87% of reports have come in ahead of analysts’ estimates for earnings per share, putting the quarter on track to have the highest beat rate on record going back to 1994, when Refinitiv began tracking the data.
Some strategists say the stronger-than-expected earnings could drive a richly valued market higher still.
The benchmark S & P 500 is trading at about 23 times forward earnings, above the long-average of about 15, based on Refinitiv’s data. ‘The earnings results are really not being fully priced in yet, and that’s because you’re seeing estimates for the back half of the year start to pick up now in response to this better-than expected environment.