Despite low rates and massive liquidity, global capital expenditure (investment) is falling; Q1 earnings growth crashes; The recession risk over the next 12 months is now a whopping 49%. Ouch!

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The Profit Party Is Over: Q1 Earnings Growth Crashes, Set For Biggest Drop In 3 Years

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After last week’s earnings deluge, 46% of the companies in the S&P 500 have now reported actual results for Q4 2018. And according to Factset data, so far earnings season is mediocre at best with the percentage of companies reporting EPS above estimates (70%) below the 5-year average. Companies are also reporting earnings that are 3.5% above the estimates, which is also below the 5-year average. The silver lining is that in terms of revenues, the percentage of companies reporting actual revenues above estimates (62%) is above the 5-year average, and on aggregate, companies are reporting revenues that are 0.8% above the estimates, which is also above the 5-year average.

Separately, the blended year-over-year earnings growth rate for the fourth quarter is 12.4% today, which while is above the earnings growth rate of 10.9% last week, if well below the Q3 earnings growth, with positive earnings surprises reported by companies in multiple sectors – led by the Energy sector – responsible for the increase in the earnings growth rate during the week.

 

U.S. companies are beating analysts’ expectations this earnings season, but to a smaller degree than normal, and S&P 500 companies are now barely expected to eke out an increase in profits for the first quarter of 2019.

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