Earnings Growth Fails to Sway S&P 500 Outlook: Chart of the Day

U.S. companies are poised to repeat their first-quarter success in exceeding analysts’ earnings estimates, according to Jonathan Golub, chief U.S. market strategist at UBS AG.

As the CHART OF THE DAY shows, last week’s profit projections for companies in the Standard & Poor’s 500 Index amounted to a 1.6 percent increase, according to data compiled by Bloomberg. The figure was unchanged from the end of March.

Estimated earnings growth for the first quarter climbed during the period to 5.3 percent from 0.6 percent. The higher percentage is based on results for about 60 percent of the S&P 500’s companies and estimates for the rest. Analysts expected lower profits in February and March, as the chart depicts.

“It is quite clear that analysts have underestimated first-quarter earnings strength,” Golub wrote yesterday in a report. Their reluctance to lift numbers for this quarter “sets the bar quite low” for the next wave of reports, the New York- based strategist wrote.

Companies whose earnings are most affected by the pace of economic growth are most likely to exceed estimates, the report said. Golub singled out industrial, raw-material and technology companies, along with automakers, retailers and others in the consumer-discretionary category.

More than 80 percent of the S&P 500’s consumer- discretionary and industrial companies surpassed analysts’ average first-quarter estimate, according to data compiled by Bloomberg through yesterday. The rate for S&P 500 companies as a group was 71 percent, up three percentage points from a year ago.

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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