MARKETS SPECTATOR: Reassuring US revenue

Earnings season in the US is exceeding estimates with the top-line results, particularly, providing cause for optimism.

US first quarter earnings are set to take centre stage this week with many of the heavyweight technology companies due to report.

So far, the reporting season has been pretty good with 60.2 per cent of the companies that have already reported beating revenue estimates and 59.4 per cent exceeding expectations on an earnings per share basis.

While the EPS beat rate is basically in line with the two previous quarterly reporting seasons, the percentage of companies beating on a revenue, or top-line, basis is showing a huge improvement, as can been seen in the below chart.


Source: Bespoke Investment Group

This is an encouraging sign in my mind as it shows that actual sales and revenues are coming in stronger than expected rather than simply earnings per share.

Earnings per share metrics can be improved through unsustainable cost cutting measures whereas actual top-line growth is a much more reliable and sustainable indicator of health.

It shows the companies are actually bringing in more money.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles