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Earnings Season: An Early Guide to First-Quarter Trends

Fin - Breakout - US

If we were talking about an exit poll, it would be too early to call the election with just 6% of precincts reporting.

And so far, the same can be said for first-quarter earnings season, with only 33 of the S&P 500 members out with results. But for John Butters, senior earnings analyst at FactSet Research, it's never too early to get deep in to the data and start looking for trends. That's why we brought the Boston-based analyst on to Breakout.

Butters, who before joining FactSet in January spent more than a decade in research with Thomson Financial and Thomson Reuters, says the big picture earnings story this quarter is just that -- big. Earnings per share for the entire S&P 500 are forecast to rise 12% to a record $98 (cumulatively) in the first quarter, and revenues are expected to climb 7%.

That means corporate profits are not only fully back, but above pre-crisis levels. If only the job or real estate markets could claim that, too.

Not surprisingly, the energy, materials and industrial sectors are each expected to outperform other groups by a substantial margin. Butters points out that 83% of the companies reporting so far have beaten analysts' bottom line estimates, while 72% have posted sales above consensus projections. Both surprise factors are above the long-term averages.

Inside the results and calls, Butters says 40% of companies have made some sort of reference to Japan and the effects of the earthquake and tsunami that hit the nation in March. He's also parsing results for any references to, or cracks in, the commodity story or the global growth story.

What about corporate outlooks for the rest of the year?

"It's a little early looking at the guidance numbers," Butters says. "We just don't have enough yet to make any definite conclusions, but so far we are seeing more companies guide higher than lower, particularly in the tech sector. But the numbers are very small at this point."

Let us know what you think. Offer your comments below or send an email to breakoutcrew@yahoo.com.