Since the beginning of the year, business news has been riddled with stories about historic market volatility, decades-high inflation rates, and an increasingly hawkish Federal Reserve.
Meanwhile, it’s earnings season. And corporate America has been announcing a mix of good and bad news with its quarterly financial results.
Amid this backdrop, a bullish story has been emerging: Expectations for earnings growth are being revised up.
“Since the beginning of the earnings season, 4Q21 EPS has been revised up 4.3% to $53.48 (+26% y/y) and 2022 EPS has been revised up 0.6% at $224.90 (+8% y/y),” JPMorgan’s Dubravko Lakos-Bujas wrote on Thursday. “Looking to the following year, 2023 EPS has been revised up 0.7% since the beginning of the earnings season to $247.54 (+10% y/y).”
This may be a surprising development considering labor shortages, supply chain woes, and other pandemic-related disruptions have led to higher costs, which have been on display in the eye-popping producer and consumer price index reports.
However, corporations have been able to offset these rising costs through operating efficiencies, operating leverage, and price hikes. It’s why profit margins have been high, and it’s why analysts expect profit margins to remain high in the quarters to come.
