LIVE MARKETS-S&P 500 has impressive profit season, but what's ahead?

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S&P 500 HAS IMPRESSIVE PROFIT SEASON, BUT WHAT'S AHEAD?

Just going by the numbers, the first-quarter earnings season looks impressive, with earnings growth of 13.6% year-over-year for S&P 500 .SPX companies, based on LSEG data as of Friday. That's up from an estimated 8% growth at the start of April.

What's more, 76% of earnings reports beat analyst expectations, in line with the percentage of reports beating estimates in the prior four quarters.

But the season has been marked by comments from companies on the uncertain outlook going forward because of the ever-changing news on the Trump administration's tariffs.

As such, "results didn't offer much of a confidence boost in the outlook for the rest of the year," Jeff Buchbinder, chief equity strategist for LPL Financial, writes.

In his note, Buchbinder says that enough guidance was given to push earnings estimates down for the year "to credible levels," but it's a tough call. S&P 500 earnings growth for 2025 is now at 8.3%, down from 10.5% at the start of April, LSEG data shows.

"Of the 251 S&P 500 companies that provided EPS guidance for the full year, 139 maintained previous guidance, 64 raised guidance, and 37 provided lower guidance (8 pulled guidance entirely). That ratio of raised vs. negative guidance, as data aggregator FactSet defines it, is quite good historically," Buchbinder notes.

But valuations have risen with the recent gains in the market, and the S&P 500 is now trading at 21.9 times forward earnings, up from where it was April 4, at 19.3 times, in the wake of a tariff-related selloff in stocks, LSEG data shows.

At this point, he says, "earnings estimates are credible, but probably only for the best case tariff scenario."

"The problem is visibility is low and margin risks from tariffs are high," Buchbinder writes, adding that it's too early to dismiss the risk of higher tariffs.

(Caroline Valetkevitch)

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