Market Overview

There's Only One Market Sector Where Earnings Estimates Aren't Falling

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There's Only One Market Sector Where Earnings Estimates Aren't Falling

The S&P 500 is roughly half way through first-quarter earnings season, and the results haven’t been as bad as some investors feared. However, analyst earnings estimates for the rest of the year have still been coming down across the board in every market sector except for the Utilities sector.

Earnings Revision Ratios

In the past three months the earnings revision ratio for the Utilities sector is 1.1, according to Bank of America analyst Savita Subramanian. The earnings revision ratio is a measure of the positive analyst earnings estimate revisions to negative analyst earnings revisions. No other sector of the market has been more upward earnings revisions than downward revisions over the past three months, Subramanian said in a note.

After the Utilities sector, the Technology sector has the next best three-month ERR at 0.9. The Materials and Consumer Staples sectors have seen the largest net negative earnings revisions in the same period.

Despite the relative weakness in earnings outlooks over the past three months, Subramanian said there’s reason for optimism so far this earnings season. In the past month alone, the Energy sector has an ERR of 2.2.

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Revenue And Guidance Numbers

The three-month sales forecast revision ratio for the S&P 500 is currently sitting at 0.86, suggesting revenue estimates are also falling so far in 2019. Guidance revisions haven’t been particularly bullish either.

“The 3m guidance ratio (GR) based on above- vs. below- consensus earnings guidance moderated to 0.48 from 0.55, the lowest in nearly four years, below its long-term average of 0.66,” Subramanian wrote in the note.

Fortunately for investors, Subramanian said the pace of estimate cut revisions seems to have started to bottom in recent weeks.

Investors looking to capitalize on the upward revisions in the Utilities sector can buy the Utilities SPDR (NYSE: XLU), which is up 9.3 percent year-to-date.

Related Links:

Apple Q2 Earnings Preview: What To Expect

What To Make Of Tesla's Brutal Quarter

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