How’s earnings season going so far in the US?
That’s a trick question. Don’t answer it. The game’s rigged.
I’m a broken record on this, but I don’t mind belaboring the point. Company analysts and the C-suite are basically in cahoots to ensure that beats are more prevalent than misses — and that the Street’s never too far offside if results are going to be any semblance of disappointing.
The dynamic’s a little different if we’re talking about top-down strategists’ calls on aggregate, index-level earnings, but the end result’s the same.
Have a look at the figure on the left, below, from Goldman’s Ben Snider. It shows actual quarterly EPS growth (the navy blue dots) versus expectations headed into reporting season.
With allowances for the notion that corporate America’s as implacable as the American consumer is incorrigible, the fact that actual earnings growth has outpaced expectations every quarter for three years with no exceptions should tell you something about the nature of this game.
The figure on the right gives you a sense of how pervasive upside guides are so far this season. More than four-dozen companies have offered full-year 2026 profit guidance and well more than half of them tipped EPS ahead of the Street. As Goldman’s Ben Snider noted, that’s easily better than the historical average of 40%.
Bottom-up consensus expects corporate America to grow the bottom line by 14% this year. Historically, that figure comes down as the year drags on, but even accounting for that drift, overall S&P EPS growth should be low double-digits this year, Snider reckons.
As long as corporate profits are growing at that clip, it’s going to be difficult to sustain an equity selloff in the absence of some definitive reason to expect a so-called “hard stop.”
The casino operators are happy to tell you what you want to hear. The cocktail waitresses refilling your bottomless drink keep whispering in your ear how much others are winning around the room. Don’t worry, your turn to win is coming soon. As one state’s lotto used to broadcast endlessly ‘You can’t win if you don’t play’! The investment market has a game with buy-in stakes to fit anyone’s weak spot. Who needs the $2 table when you can buy $0.83 of Apple stock any time night or day. If you’re really desperate, take a shot at a meme stock like Hertz. That $0.83 might be worth $2 by noon OR $0.10 by 4 PM.
My God, aren’t all these investors simply reacting to changes in earnings forecasts? Don’t earnings drive stock prices?
“…in the absence of some definitive reason to expect a so-called “hard stop.”
In today’s environment, that’s actually a pretty chilling sentence. Probably wasn’t meant that way. At least I hope so!
My 4Q tracking. 35% by name / 48% by cap of the SP500 has reported. 65% / 80% beat revenue consensus, 79% / 86% beat EPS cons. 56% / 71% saw next qtr rev cons go up, 43% / 63% saw NQ EPS cons up. Avg reaction to earnings is -0.1% / -0.5%. From memory, this is better than 3Q.