As Q1 2023 Earnings Season Ends, Corporate Uncertainty Hits a 3-Quarter High

 | May 22, 2023 22:54

  • With 95% of S&P 500 companies having reported, Q1 2023 earnings season closes with a final growth rate of -2.2%, officially indicating an earnings recession
  • The post-peak LERI shows corporate uncertainty rose to the highest level in 3 quarters
  • Potential earnings surprise this week: New Relic
  • Retailers and tech names take us out this week: LOW, NVDA, KSS, ULTA, PANW
  • Earnings season winds down, and 583 companies are expected to report this week

    • In one of the last heavy weeks for Q1 2023 earnings season, retailers gave investors a better read on the state of the US consumer. Results were a mixed bag, with Walmart (NYSE:WMT) emerging as a clear winner last week and Home Depot (NYSE:HD) as a laggard. With 95% of companies having reported at this point, the S&P 500 EPS growth rate for the season ends at -2.2%, officially marking an earnings recession as there have been two consecutive quarters of negative growth.

    Even with all the action around retail stocks, it was clear investors were more interested in the debt ceiling debate. Stocks marched higher mid-week when the likelihood of resolve was echoed by both President Joe Biden and House Speaker Kevin McCarthy. The three major indexes all closed the week higher on that optimism.

    h2 LERI Shows CEO Uncertainty Is at Its Highest Level in 3 Quarters/h2

    The uncertainty index which suggested CEOs were feeling more comfortable with how their businesses were performing in the second half of 2022 and first quarter 2023 showed that confidence beginning to waver in Q2 as companies reported their Q1 results.

    The Late Earnings Report Index (LERI) tracks outlier earnings date changes among publicly traded companies with market capitalizations of $250M and higher. The LERI has a baseline reading of 100, anything above that indicates companies are feeling uncertain about their current and short-term prospects. A LERI reading under 100 suggests companies feel they have a pretty good crystal ball for the near term.

    The first quarter earnings season (reported in Q2 2023) closed with a LERI of 106, suggesting that companies are more worried than they have been in three quarters. A reading of 106 is the highest since Q2 2022 (Q2 2022 reporting season) came in at 143. The two quarters in between saw below baseline readings of 93 for Q4 2022 and 88 for Q1 2023.

    Similarly, The Conference Board released their Measure of CEO Confidence for Q2 on May 4 with much of the same findings. The second quarter reading ticked down 1 point to 42, a reading below 50 suggests “CEOs remain largely pessimistic about what’s ahead in the economy.”