Good News: Despite Energy Price Woes, Companies Are Optimistic About Q1 Earnings

The stock market has been on pins and needles over the past six weeks as news about the war in the Middle East, energy prices, and President Donald Trump's inconsistent predictions about the war have sent it whipsawing up and down.

The Chicago Board Options Exchange Volatility Index, or VIX, spiked above 30 in recent weeks, which indicates a very high level of uncertainty and stress in the stock market, and it remains above 20 as I write this, an elevated stress level. And CNN's Fear & Greed Index remains in "fear" territory, not far from the gauge's "extreme fear" level.

Yet despite that high level of market anxiety, CEOs of large companies seem relatively optimistic about their companies' financial performance. How do we know that? Well, first-quarter earnings season is approaching (it kicks off the week of April 13), and many publicly traded companies have issued guidance for the quarter in advance of their financial reports.

Overall, 110 of the 500 large U.S.-listed companies in the S&P 500 index have issued quarterly earnings-per-share (EPS) guidance for the first quarter (that guidance is a sort of pre-earnings announcement issued in advance of a company's actual earnings report). That's according to FactSet, which tracks S&P earnings reports.

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Of the 110 companies that issued earnings guidance, 59 (about 54%) issued positive EPS guidance, meaning they expect to report earnings that beat the consensus Wall Street estimate. That percentage is well above the five-year average of 42% issuing positive guidance and the 10-year average of 40%.

Guidance from information technology companies was most optimistic

At the sector level, the information technology sector is seeing the most optimism in terms of positive earnings guidance. At the industry level, the semiconductors and semiconductor equipment industry (within the information technology sector) has the highest number of companies issuing positive EPS guidance.

Regarding negative guidance, 51 of the 110 companies that reported guidance said their earnings will come in below the consensus estimate. That marks the fewest S&P 500 companies issuing negative EPS guidance for a quarter since the fourth quarter of 2021, according to FactSet.

That's very good news for the stock market and for investors, especially in a highly uncertain market like this one. Because, as we all know, share prices ultimately follow earnings. If that forward guidance from about one-fifth of the S&P 500 proves representative of the broader market, it could be a strong tailwind for share prices across the board.

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