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Wall Street is expecting negative earnings growth for the first quarter of 2019

Scott Gamm
Reporter
FILE- In this Jan. 30, 2019, file photo specialists Mario Picone, left, and Glenn Carrell work on the floor of the New York Stock Exchange. The U.S. stock market opens at 9:30 a.m. EST on Monday, Feb. 4. (AP Photo/Richard Drew, File)

A major earnings slowdown is happening right now.

S&P 500 (^GSPC) companies are expected to report a 0.8% drop in year-over-year earnings for the first quarter of 2019, according to fresh data from FactSet.

In late January, analysts were expecting 0.7% earnings growth for the first quarter.

First quarter earnings reports won’t start rolling in until April. The current slate of earnings are for the fourth quarter of 2018, and are expected to rise 12.4% year-over-year. The fourth quarter of 2018 is the last quarter without the corporate tax cuts skewing the year-over-year comparables for earnings.

The tax cuts are the main culprit behind the looming earnings slowdown. During the first quarter of 2018, earnings grew 25% year over year.

Talk about tougher year-over-year comparables.

“Tax code changes added 7% to 8% to 2018 EPS, but are subtracting 1% in 2019 (the reversal of one-off 2018 deductions),” wrote Credit Suisse analysts, led by chief U.S. equity strategist Jonathan Golub, in a Monday note to clients.

Revenue growth for the first quarter of 2019 is still expected to rise 5.7% year-over-year for the first quarter of 2019, according to FactSet.

The good news? The earnings declines are expected to be temporary. Earnings growth is set to return in the second quarter, with 1.6% growth; 2.7% growth in the third quarter and 9.9% growth in the fourth quarter.

While we’re not pricing in an earnings recession, the data above is helping to fuel fears of peak earnings.

Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm.

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