Thanks partly to tax reform, the first quarter of 2018 was good for the economy, and stupendous for corporate profits – particularly for large companies that make up the S&P 500 Index. As of May 7, 87 percent of the S&P 500 had reported first quarter results. All 11 sectors within the index reported earnings above expectations, led by technology, financials and industrials.
Reports showed 72 percent of companies beat profit expectations, 73 percent beat sales estimates and 57 percent beat on both – the highest proportion of beats in the history of the data series, going back to 2000. Overall, earnings growth in the first quarter is tracking at 23 percent year-over-year, the best rate of increase since 2011. Bank of America, which compiles the numbers, says the gains are broad-based, and result from more than just lower taxes. Pre-tax profits in the quarter are also up 13 percent, and sales are up 8 percent versus 2017, also the best results in seven years.
Despite market volatility in the first quarter, these earnings results indicate the economy is continuing to improve.