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Earnings growth, never as bad as you think

S&P 500 companies tend to outperform their year-over-year earnings estimates once the dust settles, according to a recent report from FactSet. Since the first quarter of 2016, the average difference between the actual earnings growth rate and the estimate at the beginning of the quarter was 4.1 percentage points and was not negative in the past 12 quarters.

Currently, first-quarter earnings are expected to be 4% lower on a year-over-year basis, the first quarter since Q3 2016 that the initial estimate was negative. However, over the course of that subsequent earnings release period, actual growth numbers came out positive.

In a look at the five-year history, FactSet notes the earnings growth rate is usually 3.7 percentage points above estimates, and that if this was applied to the first quarter 2019 number, earnings growth would still be slightly negative at -0.3%.