A look under the surface of the first quarter earnings season

The excellent results of the first quarter also conceal weaknesses. Excluding energy, they remain positive but much less flattering, and companies are wondering about the future. Revisions are now expected to be on the downside, which does not rule out counter-trend rallies. Markets’ behaviour could be tricky. Remain cautious.

The earnings season has been positive on both sides of the Atlantic; as of 20 May, blended earnings growth was +11.1% YoY in the US, compared to +6.4% expected at the beginning of April; in Europe, the rebound was even more spectacular, as the economy took longer to rebound: +41.5% YoY compared to +20.8% expected at the beginning of April. However, these excellent results, although better than expected, are far from reflecting what could happen in the next two years.

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