Earnings Trade Replaces Trump Bump: 5 Top Gainers
Zacks Investment Research | May 10, 2017 10:08PM ET
U.S. stocks are hovering near fresh highs, with Apple Inc’s (NASDAQ:AAPL) market value breaking the $800 billion mark for the first time, as earnings trade replaces Trump trade. The best earnings growth pace in five years has propelled Wall Street to new heights, even though, investors question President Trump’s ability to build harmony in Washington to implement business-friendly policies. Investors are concerned that FBI Director James Comey’s abrupt dismissal could delay key items in the administration’s agenda including corporate tax reform, deregulation and infrastructure policies.
Earnings growth has been driven by Industrial Products, Technology, Consumer Discretionary, Basic Materials and Finance, with all of them on track to achieve double-digit gains in the first quarter. Henceforth, investing in fundamentally solid stocks from the said sectors that had crushed earnings estimates will be prudent. Emmanuel Macron’s victory in France’s presidential election has, in the meantime, stabilized the geo-political scenario, which should also bode well for such stocks. After all, market’s “fear gauge” is almost at a decade low.
Earnings Growth Drives Wall Street
Most equity strategists agree that the top catalyst for the market now is earnings. Total earnings for Q1 are anticipated to be up 12.7% from the same period last year on 6.2% higher revenues. As the reporting cycle has proceeded, the Q1 growth pace is on track to be the highest in five years. This will follow 7.3% growth achieved in the fourth quarter of 2016 on 4.7% higher revenues. This further shows that Q1 results represent acceleration in earnings growth.
So far in Q1, 446 S&P 500 index members have already reported results. Total earnings for these companies are up 14% from the same period last year on 7.9% higher revenues, with 72.4% beating EPS estimates and 66.4% coming ahead of top-line expectations. The growth pace for both earnings as well as revenues are tracking above other recent periods, while the proportion of companies beating estimates, mostly revenue estimates, is also higher than other recent periods. The table below shows the current Q1 earnings scorecard for the top five sectors:
| Sectors | Earnings Growth (YOY) | Earnings Beat | Revenue Growth(YOY) | Revenue Beat |
| Industrial Products | 24.1% | 76.2% | 9.7% | 81% |
| Technology | 17.2% | 78.3% | 6.8% | 80.4% |
| Consumer Discretionary | 16% | 76.7% | 14.5% | 50% |
| Basic Materials | 15.9% | 60% | 5.4% | 75% |
| Finance | 10.4% | 72.3% | 5.2% | 68.1% |
Source: The table is taken from this week’s Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.