The market may be having trouble holding on to gains amid trade war fears and volatile sentiment every time the Fed opens its mouth about economic growth, inflation or interest rates, but you might be surprised to learn that the first quarter has seen unprecedented boosts in earnings estimates—the highest since 2011.
Data compiled by FactSet shows that estimated earnings for the first quarter of 2018 have risen by 5.3% since 31 December—it’s a market anomaly at a time you wouldn’t expect and runs contrary to the usual reductions by analysts.
Five years of data proves it: For 20 quarters past—that’s five years in a row—earnings expectations have fallen by 3.9 percent on average during a quarter, FactSet says. Over the past decade, they’ve fallen by 5.5 percent on average.
If the quarter ends on 31 March with earnings estimates up 5.3 percent, “it will mark the largest percentage increase in the bottom-up EPS estimated during a quarter since FactSet began tracking” in 2002.
Perhaps surprisingly, given the fact that oil and gas seem particularly flat, the energy sector has had the largest increase in expected earnings growth since the start of the quarter—but it’s still seen a 7-percent decrease in price.
Marathon Oil topped the charges in estimated earnings increases, from $0.01 to $0.13—over 10 percent. But the biggest contributor, even if not in terms of percent increase, was Exxon Mobil, whose mean EPS estimate rose from $1.02 to $1.14. That hasn’t done anything for its share price, which has lost well over 11 percent this quarter.
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19 December 2018
20 December 2018