The U.S. corporate earnings seasons hits the mid-point this week with profits rising more firmly than expected over the three months ending in December, but muted global economic growth, the fading impact of U.S. tax cuts and uncertainty surrounding the fate of trade talks between Washington and Beijing likely means a sharp decline in bottom line performance for America's biggest companies.
With around 234 companies in the S&P 500 reporting December quarter orofits as of last week, collective earnings per share have grown by around 18% compared to the same period last year, just ahead of the 15.5% estimate for the entire reporting season thanks to stronger-than-expected numbers from bluechips such as Facebook (FB) , Exxon Mobile (XOM) and Boeing (BA) . Just under 71% of companies have reported earnings that have beaten analysts' estimates, according to Refiniitv data, a figure that is firmly ahead of the long-term average of 64% but also well below the 78% recorded over the past four quarters.
Revenue growth of 6.1% is also running just ahead of the full-season estimate of 5.7%, but with only 61.5% of companies topping Street estimates, compared to a long-term average of 60% and a 72% score over the past four quarters, topline growth hasn't been strong enough to dispel concerns of a notable slow-down in corporate profits in the coming quarters.
Refinitiv forecasts suggest first quarter 2019 earnings growth will slow to just 0.7% -- compared to the 26.6% pace recorded over the same three month period last year -- as the impact of the $1.5 trillion corporate tax cut, enacted in the final days of 2017, rolls off. Slowing global growth and the uncertainty surrounding U.S.-China trade talks will likely keep earning muted over at least the first half of the year, as well, with second quarter EPS growth pegged at 3.8%.
Alphabet (GOOGL) is the undoubted highlight of this week's earnings slate, with the Google parent set to report after the close of trading Monday as the last of the so-called FAANG stocks to report over the December quarter. Walt Disney Co. (DIS) after the close of trading Tuesday, with luxury goods companies Estee Lauder (EL) and Ralph Lauren (RL) and micro-blogging website Twitter TWTR also set to update investors later this week.
Skyworks Solutions (SWKS) , Qorvo (QRVO) , Cummins Inc. (CMI) , Chipotle Mexican Grill (CMG) , Kellogg (K) , Nuance Communications (NUAN) and T-Mobile USA (TMUS) are just a few of the 50 or so companies lined up to report between now and Friday.