In year 2000, many booming tech companies were selling at 200 or 300 times next year’s earnings. Today, with about 20% of S&P 500 results reported since April 1, 76% of companies have beaten expectations, albeit with a weak revenue mix, according to Barclays estimates.
“The upside surprises on EPS have been driven primarily by a strong mix in Tech and Industrials, though results on the topline have been less impressive across the board. The handful of Staples companies that have reported thus far have delivered the best revenue mix,” they commented on Friday.
“The average company within the S&P 500 has grown revenues by only 2.9% year on year, compared to 20.1% growth in EPS, which was boosted by strong year-over-year results in Discretionary and Materials. Full year ’15 growth forecasts for the average company within the S&P 500 have been revised -89 bps since April 1st to +6.1%, while full year ’16 growth forecasts have been revised +20 bps, to +14.4%. Energy companies, which saw out-year estimates increase significantly last quarter, have seen expectations moderate somewhat since then.”
For analysts at Link Securities, it is important to note that market watchers have lowered their standards so most of the companies are capable of beating them.