Investors are punishing US firms missing profit estimates by the most in four years, according to data compiled by Bloomberg Intelligence.
With about a fifth of the S&P 500 members having reported, shares of companies that lagged analysts’ estimates on the earnings-per-share metric have seen their stock underperform the benchmark index by a median of 3.7% on the day of results, the figures show. That’s the worst performance in the data’s history going back to the second quarter of 2019.
Even companies beating estimates have lagged the S&P 500 by 0.6% — the first such showing since the fourth quarter of 2020.
The lackluster reception defies support from cheaper stock valuations coming into the season after two straight months of declines for the S&P 500. The benchmark is now on track for its third straight monthly drop.
While Wall Street analysts had grown more confident about the earnings outlook for next year, short-term revisions show downgrades are once again outnumbering upgrades.
Strategists such as Morgan Stanley’s Michael Wilson have warned that earnings forecasts for the fourth quarter as well as 2024 remain too high — reducing the odds of a year-end rally.
Company guidance is also “meh at best” as company executives warn of caution among consumers, said Wells Fargo & Co. strategist Christopher Harvey. Only eight S&P 500 companies have raised full-year forecasts so far, while seven have cut their outlook by at least 1%, he said. The previous quarter had seen 116 raises and 47 cuts, Harvey said.
This article was provided by Bloomberg News.