Below is a look at the historical earnings beat rate (vs. consensus analyst estimates) for US companies reporting quarterly numbers on a rolling 3-month basis. These charts are updated on a regular basis at our popular Earnings Explorer tool. The first chart shows the bottom-line EPS beat rate, while the second chart shows the top-line revenue beat rate. Prior to the last week or so, beat rates had been on the upswing, but they’ve taken a slight dip since the market peaked on February 19th.
The reading that has really taken a hit since the COVID-19 virus began to spread is forward guidance. The chart below shows our Guidance Spread tracker from our Earnings Explorer tool, which looks at the difference between the number of companies raising guidance and lowering guidance on a rolling three-month basis. As shown, our guidance spread has fallen dramatically over just the last three weeks, which coincides with the rapid outbreak of the coronavirus both inside and outside of China. At this point, our guidance spread has taken out lows seen in November 2019, but it’s not nearly as negative as it was in the early part of 2019.
Along with the big drop in our guidance spread tracker, share price reactions to earnings reports have also taken a big hit. The chart below shows the median one-day share price change that stocks have experienced on their earnings reaction days on a rolling three-month basis. Over the last three months, the median share price change for stocks on their earnings reaction days has been -0.56%. That’s the most negative reading seen in the last twelve months, and it’s a complete reversal of the trend of positive share-price reactions we were seeing as recently as January. Stocks have gone from reacting very positively to their earnings reports to reacting very negatively to their earnings reports in just a few weeks. You can see these charts over a longer time frame at our Earnings Explorer page, which is available to Bespoke Institutional members. Start a two-week free trial to Bespoke Institutional to access our Earnings Explorer, the rest of our interactive investor tool-kit, and our actionable investment research.