Most Important Week Of Earnings Season Is Here — Will S&P 500 Companies Continue Beating Wall Street Estimates?

Earnings season is in full swing, with 35% of companies in the S&P 500 reporting this week.

Company performance through the fourth quarter of 2022 will lend a clearer view into the general state of the U.S. economy after an almost full year of Fed interest rate hikes.

Several mega-cap companies are reporting earnings on Tuesday, including Spotify Technology SA SPOT, Marathon Petroleum Corp MPC, Pfizer Inc PFE, Philips 66 PSX, United Parcel Service Inc UPS, McDonald's Corp MCD, General Motors Company GM and Exxon Mobil Corp XOM.

Last week was a historical win for the private sector. Financial market data firm FactSet reported that after over 29% of S&P 500 companies had reported earnings, 69% of those companies beat consensus estimates on earnings per share, and 60% beat consensus on revenue.

Tesla TSLA led the charge after posting earnings per share of $1.19 against Wall Street estimates of $1.13.

U.S. Beats Rest Of The World: A separate report by FactSet puts companies with more international exposure reporting lower earnings and sales than those more focused on the U.S. market.

FactSet divided the S&P 500 into two groups: those that make more than 50% of sales inside the U.S. and those that generate more than 50% of sales outside the country.

Companies with more international exposure performed worse in both earnings and revenue growth. That puts U.S. companies in tech and communications at the highest risk. 

“The Information Technology and Communication Services sectors are the top contributors to the larger earnings decline for S&P 500 companies with more international revenue exposure,” said the report.

Intel Corp INTC, Alphabet Inc GOOG, Meta Platforms Inc META, and Apple Inc AAPL were four of the largest contributors to the larger earnings decline for S&P 500 companies with more international revenue exposure, within these two sectors.

What It Means For Investors: While positive quarterly earnings results are a good sign for the equity market, the current inflationary circumstances could have the good news cutting both ways. 

As the economy continues to cruise past contraction fears, the Fed is more likely to confirm another hike in interest rates. Investors will have a clearer view of what's ahead after the Fed announces its decision on Wednesday.

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