6 Reasons to Expect a Good Earnings Season

As fourth quarter earnings season kicks into high gear, we’ve put together a list of six reasons why we expect it to be a good one:

  1. Economic surprises: The U.S. Citi Economic Surprise Index, a measure of economic data relative to expectations, is near record highs, and economic momentum points to good upcoming results.
  2. Strong manufacturing activity: Manufacturing surveys (ISM and PMI indexes) have been among the strongest in a dozen years and are historically well correlated with earnings growth.
  3. Weak U.S. dollar: Dollar weakness (-6.0% in the fourth quarter) props up overseas earnings for U.S.-based multinationals and may present a tailwind for fourth quarter earnings.
  4. Pre-announcements: The trend for fewer negative profit warnings tend to lead to better-than-expected earnings results.
  5. Stable estimate revisions: Analysts’ estimates for the fourth quarter have remained largely unchanged—resilient estimates are typically a positive sign for final results.
  6. Higher energy prices: Higher oil prices mean more profits for energy companies (6% of the S&P 500 Index weighting) and also more investment in energy infrastructure via the industrial sector.

Considering these trends, John Lynch, Chief Investment Strategist, notes that the combination of solid global demand, tighter corporate income statements, and the recent tax law indicate that profitability remains a strong tailwind entering 2018.

We will provide a more detailed earnings season update in our next Weekly Market Commentary.



Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

The economic forecasts set forth in the presentation may not develop as predicted.
Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Because of their narrow focus, specialty sector investing, such as healthcare, financials, or energy, will be subject to greater volatility than investing more broadly across many sectors and companies.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor Member FINRA/SIPC

For Client Use – Tracking # 1-689317 (Exp. 01/19)