JPMorgan (JPM) and Wells Fargo (WFC) kick-off the earnings season on April 13th.
The most profound change on the earnings scene lately is the unusually positive revisions trend for Q1 and following quarters. The chart below shows how 2018 Q1 earnings growth expectations have evolved since mid-December 2017.
This is a sight that we haven't seen in a very long time; definitely not in the last 6 years.
• Earnings estimates for Q1 and the following quarters have gone up in a notable way, with tax law changes as the most notable reason for the positive revisions. The positive revisions are broad-based, with estimates for 13 of the 16 Zacks sectors going up.
• In percentage terms, estimates have gone up the most for the Basic Materials, Energy, Industrials and Aerospace sectors. In absolute terms, the positive revisions to the finance and Technology sectors account for more than half of all estimate upgrades since the quarter got underway.
• This positive revisions trend is the most drastic change on the earnings scene in recent years and will be closely watched whether estimates for Q2 would follow a similar favorable trend as the Q1 earnings season unfolds.
• The implied ‘EPS' for the index, calculated using current 2018 P/E of 18.1X and index close, as of March 22nd, is $160. Using the same methodology, the index ‘EPS' works out to $175.32 for 2019 (P/E of 15.1X). The multiples for 2018 and 2019 have been calculated using index's total market cap and aggregate bottom-up earnings for each year.
