US Q1 Corporate Earnings Strong... Recovery Faster Than Expected

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[Asia Economy Reporter Song Hwajeong] U.S. companies showed a faster-than-expected recovery by posting solid earnings in the first quarter of this year.

According to Hanwha Investment & Securities on the 21st, as of the 18th, 457 companies in the S&P 500 have reported their earnings, of which 77% posted better-than-expected sales and 87% reported profits exceeding market expectations.

First-quarter sales were initially expected to increase by 8.5% year-on-year as of early April before earnings announcements began in earnest, but as of the 14th, this estimate improved to a 12.9% increase. First-quarter profits are expected to increase by 50.6% year-on-year, which is 26.4 percentage points higher than the 24.2% forecast in early April. Choi Bowon, a researcher at Hanwha Investment & Securities, explained, "As first-quarter profits were announced at a better-than-expected level, profit forecasts for the second, third, and fourth quarters were also collectively revised upward. However, major companies presented conservative guidance, so the range of change compared to early April was limited to 7.6 percentage points, 4.1 percentage points, and 2.9 percentage points, respectively."

By industry, sales in all 11 sectors classified under the Global Industry Classification Standard (GICS) increased year-on-year and were revised upward compared to early April. The sectors with the largest profit increases in the first quarter were consumer discretionary, financials, consumer staples, and communication services, which rose by 191.3%, 137.5%, 62.3%, and 53.4% year-on-year, respectively. The only sector among the 11 that saw a profit decline was utilities (-0.9%).

The annual profit for the S&P 500 index this year is projected to increase by 35.1% year-on-year. Researcher Choi said, "As of early April, it was expected to increase by only 25.9%, but as earnings announcements progressed, the forecast was revised upward by 9.2 percentage points. It is expected that all 11 sectors will see profit increases compared to the previous year for the full year." The sectors expected to have the highest annual profit growth rates are energy (898.3%), industrials (82.6%), and consumer discretionary (66.1%), in that order.

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