In late March, just before the first quarter earnings reports came in, there was worry that companies and analysts had become overly optimistic. The symptom cited was less trimming of estimated earnings before the actual reports.
On March 31st, I addressed the issue in “Earnings Reports Coming – What Does Less Trimming Mean to Investors?” My thought was that, given that other optimistic signs were not evident, the reduced trimming could be an indicator of even better earnings.
That seems to be the case. There have been articles written about the large proportion of companies reporting better-than-expected earnings (i.e., “positive surprises”). Here are the results for the Dow Jones Industrial Average companies, the last of which reported earnings yesterday (Tuesday, May 18).
(Click to enlarge)
Note two items:
- Only three companies (10%) reported negative surprises
- The median (mid-point) result was a healthy 9% positive surprise
Also, all results are now positive – no negative earnings reports, nor are any forecast.
Disclosure: Author long AA, CAT, INTC, KO, MRK, WMT and XOM