Earnings Trends: Large Caps Outperform Small, Mid-Caps

We are entering the home stretch for the first-quarter earnings season. Positive surprises continue to lead but much more so for the large-caps than for the mid or small-caps.

In the S&P 500, positive surprises are ahead of disappointments by a 3:1 margin. The ratio for the mid-caps is just below 2:1, and does not even reach 1.5:1 among the small-caps. A similar tale is told by the median surprise, at 3.22% for the large-caps, 2.78 for the mid-caps and just 1.75% for the small-caps. The large-caps are closer to finishing the season than are the mid or small-caps, but even the small-caps have almost three-quarters of the reports in.

The large-caps are also showing the best year-over-year median growth rate at 10.08%. That pretty much makes it an even bet if we end up with a 19th straight quarter of double-digit year-over-year growth. That makes for a nice talking point, but in reality, the difference between 9.99% and 10.01% is no more significant than the difference between 8.55% and 8.57% or between 11.28% and 11.30%. Regardless of which side of 10.0% the final number comes in at, it will be far better than expected going into the earnings season. The small-caps are lagging behind the large-caps in terms of median earnings growth, at 8.88%, but that is still a very respectable showing, and they are outpacing the mid-cap growth of only 6.35%.

Among the sectors growth is more uniform among the large-caps than among the smaller indexes. Ever large-cap sector is showing positive year-over-year growth, and only one tops 15%. In the mid-caps three sectors are showing negative growth and two are over 18%. In the small-caps, six of the sectors are showing very robust growth while four are very anemic.

In terms of the sectors, Health Care stands out in all three indexes, taking gold in the Large-caps, Silver in the Mid-caps and Bronze in the Small-caps. However that bronze for over 22% growth, much more than the 15.4%growth that earned it the Gold among the large-caps. Materials had a very strong showing among both the big and small-caps, but was lackluster in the mid-caps. Industrials put in a solid showing in all three size groups.

Energy, Tech and Consumer Durables were the slow growers in all three indexes. While Utilities came in the middle of the growth pack for all three indexes, it had more disappointments than positive surprises at all three levels. Among the large and mid-caps, it was the only sector with more disappointments. In the small-caps it was joined by the Financials for that dubious distinction.