More pain, less gain

Investors often complain that the market punishes companies they hold in their portfolios after quarterly results miss expectations more so than it rewards companies for beating expectations. Indeed, according to Factset, over the last five years shares of companies that beat expectations have risen on average 1.0% compared to the 2.3% decline recorded following an earnings miss. For the second quarter of 2024, with more than 90% of S&P 500 member companies results posted so far, 78% have beaten earnings estimates and 59% have beaten revenue forecasts. Moreover, S&P 500 earnings are on pace to have risen 10.8% year on year in 2Q24 compared to the 8.9% growth expected at the start of the quarter. Nevertheless, during the 2Q24 reporting season, the shares of companies that have beaten earnings estimates have risen just 0.8% on average, while those that missed estimates have fallen 3.8% on average.

Source: Factset, August 2024