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The S&P 500 is on pace to post its best quarterly results since 2021, but investors have been less impressed with many of the earnings beats that have driven the index higher.
With results from most S&P 500 companies in hand, 84% of firms have beaten first-quarter earnings estimates. That is the largest share since the second quarter of 2021 and well above the historical average.
However, FactSet’s analysis indicates that the strong beat rate has not translated into exceptional near-term stock performance for many companies. On average, stocks rose 1.1% in the four-day window spanning two days before earnings through two days after earnings following an earnings beat. That is only slightly above the five-year average of 1%.
While beats have produced relatively modest average gains, the market reaction to misses has been harsher. For companies that missed earnings estimates, the average share price decline in the same four-day window was 4.9%, compared with a five-year average decline of 2.9%.
FactSet’s findings point to investor sentiment as a key driver of stock performance alongside earnings and broader market conditions. The analysis suggests sentiment is skewing negative even as technology stocks help push major indexes to record highs.
FactSet’s data covers earnings reports through last Friday, and this week’s trading has largely followed the same pattern. Constellation Energy’s earnings beat did not prevent its stock from slipping 1% on Monday. Swiss shoemaker On Holdings topped estimates and raised guidance, yet its shares fell on Tuesday. By contrast, Under Armour and Hims & Hers Health each dropped by double digits on Tuesday after reporting results below expectations.
Beating estimates alone does not fully determine investor reaction. Investors also focus on the magnitude of the earnings beat and, importantly, company outlook. In aggregate, earnings have topped expectations by more than 18%, which is well above average and the most in five years. The share of companies providing disappointing guidance this quarter is below average, and analysts have increased their future-quarter estimates rather than cutting them as results have come in.
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