NEW YORK – It's time to show the receipts, CEOs.
For more than a year, investors have been pushing up stock prices, even though the pandemic caused profits to crater for companies. With COVID-19 vaccines going into arms and businesses reopening, investors want to see that faith rewarded with some proof of fat profit growth, starting now.
Not only are expectations high for this upcoming earnings season, which got going Wednesday with reports from JPMorgan Chase and other big banks, they're rising even more by the day. When the first quarter began, analysts were forecasting earnings growth of less than 16% for S&P 500 companies. Now, those same analysts say the tally should be closer to 25%.
If companies end up reporting better numbers than analysts predicted — which is what usually happens — this may be the best reporting season for growth in more than a decade, according to FactSet. During the summer of 2010, S&P 500 companies reported 34% growth coming out of the Great Recession.
“The bar has been raised, but not by enough,” Deutsche Bank strategist Binky Chadha said of expectations for this earnings season.
Even the best profit growth in a decade may not juice stock prices further, though, because the S&P 500 has already soared more than 80% since hitting a bottom in March 2020.
Last quarter, for example, companies that reported higher sales and earnings than expected actually lagged the S&P 500 the following day, according to Savita Subramanian, equity strategist at Bank of America.
This earnings season, many analysts expect companies to again get little to no boost for reporting stronger-than-expected earnings, given how much their stocks have already rallied on those expectations.