5 takeaways from earnings season and why muted reaction to beats is not "late cycle" signal.

The video in this report is only accessible to members

The video in this report is only accessible to members
The video in this report is only accessible to members
The video in this report is only accessible to members
The video in this report is only accessible to members

VIDEO: The muted reaction to positive EPS, in our view, reflects the cautious macro views (uncertainty) given the stubborn inflation reports.  1Q24 EPS seems more early cycle. (duration: 6:06).

The video in this report is only accessible to members
The video in this report is only accessible to members

This week is light on incoming macro, so earnings is likely primary focus. Overall, it's been a good earning season (80% of companies beating) but with a more muted equity reaction. The key takeaways from earning season are as follows:

First, earnings beats strong enough to raise 2Q2024 EPS as well as FY2024 EPS. This is the first time since 2021 that quarterly earning estimates have revised higher (+0.5%) in the first month of the quarter (2Q24) and this was last the case in 4Q21. Second, there is enough EPS momentum + sector reversals to drive acceleration of EPS YoY growth through the rest of 2024. As we noted in recent notes, 3 sectors are seeing a reversal (to positive) in EPS momentum:- 1Q24 2Q24- Energy -24% +17%- Healthcare -24% +21%- Materials -21% -6% Third, this upturn in EPS growth is more consistent with “early cycle” EPS. That is, a renewed momentum in earnings, which is following the upturn in the PMIs. The PMIs ...

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