The last time corporate profits looked this good, the world was only just turning the corner on the COVID-19 pandemic.
S&P 500 members are tracking toward 26% year-over-year earnings growth in the first quarter, making it the best earnings season since 2021, said the Bank of America team in a note on Monday.
By the numbers: With results in from 445 S&P 500 companies (86% of index earnings), first quarter earnings season has “blown past expectations,” said BofA strategist Jill Carey Hall.
The numbers to know include:
1) The S&P 500 is on pace to deliver 26% earnings per share growth year over year (18% excluding large one-time gains recognized by Amazon, Google, and Meta) versus consensus forecasts of just 12% on April 1;
2) Strength isn’t confined to megacap tech companies: The median company is growing earnings per share by a solid 12% year over year;
3) 64% of companies have beaten both earnings per share and sales expectations, nearly 20 percentage points ahead of the historical average of 42% since 2001; and
4) Sales growth adjusted for foreign exchange fluctuations and inflation is on pace to rise 7% from the prior year.
All of these metrics are the best since 2021, noted Hall.
Read more: Live coverage of corporate earnings
Bottom line: No doubt enthusiasm over the stability of corporate profits amid the Iran conflict has fueled the S&P 500 to record highs. That and the next wave of AI mania, which could catch another breeze of insanity when Nvidia (NVDA) reports earnings next week.
But the economic backdrop is far from perfect, and the first quarter could prove to be the peak for corporate earnings growth this year.
Said Hall, “While 1Q results suggest robust AI demand and a broadening Industrial recovery, the consumer outlook remains murky. We heard some talk of a “C”-economy from Hilton (i.e., lower and higher income beginning to converge), but most commentary still points to a “K”, with McDonalds flagging more lower-income weakness. Planet Fitness scrapped plans to raise prices after weak membership growth, but premium gym Life Time painted a much rosier picture. Although April jobs beat expectations and layoff talk remains contained outside of tech, BAC aggregated credit and debit card data notably softened last week — could just be a blip, or an early sign that higher gas is taking a toll.”
Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
