It was in the FedEx earnings which came out long before the major corporate earnings season started, with the shipper missing estimates by a lot, and that was after analysts had already taken estimates down in the runup to its earnings report. Making too much of any single earnings bellwether isn’t a good way to think about the S&P 500, especially as it is now dominated by tech, but the fact that analysts didn’t take FedEx earnings estimates down enough is notable for setting the tone for how companies come into earnings, and how different it may be this time around compared to all the other quarters since the Covid bottom.
A make-or-break quarter for the S&P 500
In the runup to Q2 earnings, growth estimates were rising for the S&P 500. That has not been the case this time, with growth estimates continuing to fall in the weeks ahead of the major earnings that began Wednesday. Prior to the recent negative earnings revisions, there had been nothing but increasing estimates over the last 12 months. That’s one of the reasons investors don’t need to struggle to understand why stocks have struggled since September.
“It was much easier to be bullish on U.S. stocks when analysts were raising estimates virtually every week, as they did up until September,” DataTrek Research noted in a recent report.
And that hasn’t changed this month. Sam Stovall, chief investment strategist at CFRA Research, says usually EPS estimates have begun to outpace the end-of-quarter estimate this early in the reporting cycle, but that’s not happening as major corporate earnings begin, with the S&P 500 continuing its trend of negative revisions, off by 1.7 percentage points through Oct. 11 versus Sept. 30.
According to Stovall, this may end up being only the second quarter out of the last 49 in which actual results were lower than end-of-quarter estimates.