Strong Earnings Beat Expectations, But No One’s Watching

April 21, 2025

Oxymoron or paradox. This may be the most important earnings season in recent history that receives very little attention.  While headlines during this time of year are normally related to whether companies beat or missed earnings expectations, this year’s headlines are dominated by trade, tariffs, and geopolitics.  Notwithstanding the lack of coverage, earnings season has begun and is off to a good start.  Earnings growth from the prior year is averaging 7% with 72% of companies beating estimates, while revenue growth is averaging 6% with 70% of companies beating estimates.

Corporate quarterly updates are required for large publicly traded companies.  They are structured to inform investors how the company has recently performed, future guidance from management, and time for research analysts to ask questions.  Ultimately, these updates are checkpoints for investors to see where the company has been and where it is going. 

 This looking back and looking forward function is akin to the hard and soft data discussed in our second quarter edition of the Market and Economic Update.  The company financial information is hard data and demonstrates how the company has actually performed.  Future guidance is more like soft data or confidence, it’s an educated guess. This quarter, it is likely there will be tension between recent earnings (hard) and future expectations (soft), similar to what we see in other economic releases.  It would not be surprising if those listening to the calls were more interested in the future guidance (soft data) given the recent changes and uncertainty regarding trade, tariffs, and geopolitics.  

While it is still early in the earnings season, we get a glimpse of the challenges management teams face from Delta Air Lines and United Airlines.  United Airlines offered listeners two guidance scenarios one for a stable environment and one for a recession.  Meanwhile, Delta decided to pull their guidance and offer no revenue and earnings estimates for the coming quarter and year.  Another way to see the change in soft data is to look at the change in earnings estimates.  The chart below from Zacks Investment Research shows the change in second quarter earnings growth estimates from the beginning of the year through today.  There has been a gradual decline in earnings growth estimates over the past several months. 

The soft data of company guidance this quarter may result in deafening silence.  It is important to remember that sometimes less is more; simplicity can lead to greater outcomes.  Time and again, disciplined investing (diversification, rebalancing, focus on value) and sticking with a predetermined plan beats reacting to the uncertainties of the future.  If you have any questions, please  reach out to your Wealth Management Advisor. Your success matters to us.