Above Average!

Up/Down Earnings

With the first month of Q2-25 in the books, the Up/Down ratio reads 1.84. You’ll notice this is above the 41-year average of 1.82 for the first time since January 2022. That gap of 13 quarters between above average “one-month” readings matches the longest previous streak, which was the lead-up to and during the depths of the Financial Crisis. This vignette’s emerging positive momentum was in question after a lackluster Q1 but, now, with about one-third of the universe having reported, the story of broadening YOY growth seems to be back on track. 

Q2: Slow Sales Growth

YOY S&P 500 sales-per-share is on track to grow 3.1%—very much aligned with Q1’s +3.5% figure. Again, this stunted top-line rate is just a hair better than the Core CPI for the period.

S&P 500 operating margins, on the other hand, are looking fat as can be. The 12.6% initial Q2 estimate would be the highest figure since Q4-21.

S&P 500: Lowered Bar Easily Cleared

Q2 estimated bottom-up operating EPS shot 2% higher after the first month of reporting. This recovery effectively negates some of the markdown associated with trade uncertainty in recent months. The EPS snail trails for the coming three quarters have also leveled-out or even turned higher. Sixty-eight percent of firms have beat both top- and bottom-line estimates (mid-50% range has been the norm the past several quarters), inline with the wild rates in 2021, when consensus estimates couldn’t keep up with results.

Forward EPS projections are looking brighter for all three S&P market-cap flavors (table). Perpetually range-bound EPS estimates for the S&P 600 and 400 have gained 4% and 3%, respectively, over the last two months.