RBC: S&P 500 Earnings Trend Signals Market Chop

Key Findings on Earnings Revisions

S&P 500 companies are exhibiting weaker earnings revision trends compared to previous quarters, a factor potentially contributing to recent market volatility, according to a new report by RBC Capital Markets.

Current Situation Overview

The rate of upward earnings per share estimate revisions has dropped to 51.4%, a significant decline from the 65% peak last September. Furthermore, the percentage of companies surpassing EPS expectations has decreased to 77% from 82% in the prior quarter, indicating a cooling sentiment.

Impact on the Market

RBC strategists describe the reporting season as 'slightly squishy,' suggesting that uneven market performance is not solely due to geopolitical factors. Despite this, the firm notes that the macroeconomic outlook from earnings calls has not raised major alarms among corporate leaders.

Summary and Outlook

While short-term earnings sentiment appears weak, RBC maintains a constructive outlook for U.S. equities for the year. The firm anticipates that market returns will be closely tied to actual earnings growth rather than expansions in P/E multiples. The consensus 2026 EPS forecast offers a positive note, stabilizing above $313.

FAQ

Q: What is the main finding from RBC's report?
A: S&P 500 companies are showing weaker earnings revision trends, with both the rate of upward revisions and EPS beats declining from previous quarters.

Q: What is RBC's outlook on the market?
A: RBC remains constructive on U.S. equities but expects future returns to be driven primarily by earnings growth, not P/E multiple expansion.

Source: investing.com