Better-Than-Expected Earnings Lift Stock ETFs
April 26th, 2012 at 7:00am by Tom Lydon
Earnings season is in full swing and most companies are beating Wall Street analysts’ forecasts, supporting equities prices and stock exchange traded funds.
WisdomTree Total Earnings Fund ETF (NYSEArca: EXT), which follows earnings-generating companies in the broad U.S. market, is up 9.8% year-to-date and the WisdomTree Earnings 500 Fund ETF (NYSEArca: EPS), which tracks large-cap earnings-generating companies, is up 9.7% year-to-date. [Should ETF Investors ‘Sell in May and Go Away?’]
SPDR S&P 500 ETF (NYSEArca: SPY) is up 9.4% year-to-date.
“Quarterly earnings-per-share have risen 11% for the 174 companies in the S&P 500 that reported since April 10, with per-share results beating analysts’ forecasts by 9.7%,” according to data compiled by Bloomberg. “Before the start of the earnings season, analysts had predicted earnings growth of 0.8%.”
Profit expectations for the first quarter were subdued as many analysts anticipated lower demand for American products overseas and rising costs, especially in oil prices. However, the low profit expectations has made it easier for companies to exceed projections.
“The earnings season is shaping up to be quite a bit better than expected,” Mike Ryan, the chief investment strategist at UBS Wealth Management Americas, said in the Bloomberg article. “Remember that the bar was set incredibly low. Overall however, it is supportive for markets. What this tells us is that we are in a more sustainable and durable expansion.”
By April 25, 79% of U.S. companies that have reported first quarter earnings have beaten earnings forecasts and overshot revenue forecasts at a rate of 76%, reports Caroline Valetkevitch for Reuters.
In comparison, 62% of S&P 500 companies have historically reported higher-than-expected first-quarter results, according to The Globe and Mail.
After the bell Tuesday, Apple (NasdaqGS: AAPL) reported almost double the expected earnings results on higher-than-expected iPhone and iPad sales, according to MarketWatch. [QQQ Leads Dow, S&P on Apple Earnings]
PowerShares QQQ Trust (NYSEArca: QQQ) is up 16.1% year-to-date. Apple is the largest stock component of most Nasdaq-100 and technology related ETFs.
SPDR S&P 500 ETF
For more information on the broader market, visit our S&P 500 category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own SPY and AAPL.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.