Monday's update from Barclays (LON:BARC) noted that more than half of the S&P 500 companies have reported their earnings, with a notable 81% surpassing consensus earnings per share (EPS) estimates, exceeding the long-term (LT) average. Despite this, sectors such as Staples, Utilities, and Materials have seen the most frequent misses in their earnings reports.
The financial institution noted that earnings have delivered a positive surprise of 8.2% above the LT trend, with year-over-year (Y/Y) growth showing robust results both in revenue, up by 5.1%, and bottom-line growth, which rose by 12.3%. However, Barclays pointed out that the lower-than-usual estimates set prior to the earnings announcements could have contributed to the lower bar for surpassing expectations, potentially explaining why stocks that missed estimates faced harsher reactions this season.
According to Barclays, the strong Y/Y EPS growth is predominantly fueled by the Technology, Media, and Telecom (BCBA:TECO2m) (TMT), Financials, and Healthcare sectors, all of which are reporting growth above their LT median levels. Conversely, the Staples, Industrials, and Consumer Discretionary sectors, excluding Amazon (NASDAQ:AMZN), are underperforming relative to their LT median growth levels. Additionally, EPS for commodity-linked sectors has declined compared to the same period a year ago.
Big Tech companies have seen a significant increase in EPS, with growth exceeding 31% Y/Y before NVIDIA's (NASDAQ:NVDA) report, although the surprise factor was only average due to optimistic expectations. Barclays also highlighted that Big Tech's price-to-earnings multiples are compressing in the face of better forward EPS, as the market had underestimated the capital expenditures of hyperscalers for the year 2025.
Lastly, Barclays emphasized that the year-to-date rally in Financials has been underpinned not by multiple expansion but rather by an improved earnings outlook for the next twelve months (NTM) compared to the last twelve months (LTM). This trend is described as unique among sectors excluding Technology.
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