This Week in Earnings

Heading into earnings season, our Q1’24 Inside The Buy-Side® Earnings Primer® survey, published April 11, registered higher optimism despite dashed rate cut hopes and stickier inflation. Supporting this uptrend was the view the U.S. would dodge a recession and deliver strong YoY Q1 prints. Still, investor exuberance remained in check amid continued macro and monetary policy uncertainty, with margins back in focus in a bigger way QoQ.

With Q1’24 earnings season in the books, we “Close the Quarter” with some notable themes:

1. Earnings and Outlook: Prints surpassed already strong expectations, particularly on the bottom-line; executives pointed to favorable outlooks and hung their hats on the back half of 2024
2. Notable Inflections: The consumer pulls back, inventory destocking nears an end, and executives double down on expense management and productivity initiatives
3. Guidance Moves and Consensus Shifts: While more companies maintained guidance across both revenue and EPS, upward adjustments outpace downward moves, and nearly all sectors saw more analysts revising EPS higher
4. Capital Allocation: QoQ cash deployment trends reveal lower capex levels in general and increased commitment to buybacks and debt paydown; M&A spend up meaningfully YoY

Executives remain generally optimistic with their outlooks, particularly for the second half. Investor enthusiasm toward the latest round of job growth and inflation figures, buoyed by the relative stability of Q1 earnings, suggests the air continues to get thinner as expectations for 2024 become ever more elevated. Capital allocation trends and sentiment indicate companies are eyeing acquisitions again, and investor tolerance for slightly higher debt loads is increasing. Further, support for maintaining or increasing reinvestment levels in support of growth is high.

Nonetheless, the focus remains squarely on companies’ ability to preserve profitability amid heightened volatility. As we move forward, continued expense management, productivity initiatives, and operational agility will be crucial for satiating growing earnings expectations — as reflected by both guidance and consensus shifts this quarter.