Good guidance is the new earnings beat for investors
Why it matters: In a moment of marked policy uncertainty, companies are struggling to meet investors' lofty expectations on their forward guidance, which could put pressure on the broader market.
By the numbers: Companies that beat both revenue and profit estimates on average outperform the S&P 500 by nearly 1.9 points the following day, per data from Bank of America.
Companies that deliver upward guidance outperform the index by 3 points the next day, but companies that miss on guidance underperform by nearly 4 points.
Meanwhile, the gap between how many companies beat expectations, versus miss them, is now at its widest point in three years.
40% of companies have raised guidance for the second quarter, versus 10% for the first following tariff uncertainty, per data from Citi.
What they're saying:"Meeting expectations isn't even necessarily sufficient," said Steve Sosnick, chief investment officer at Interactive Brokers.
It's not enough to hit guidance expectations anymore. Companies have to exceed them.
For example: Alphabet reported beats on the top and bottom lines, but the company doesn't provide formal guidance on earnings calls. The stock had a modest upside reaction the day after.
Texas Instruments delivered guidance that was better than most estimates, but its stock still saw its worst decline in nearly two decades, all because its outlook wasn't rosy enough.
Be smart: In a frothy market, guidance matters. Upbeat forecasts suggest that companies see enough growth ahead to justify lofty valuations.
"I think it's a sign of the market's mood right now," said Sosnick, who added that markets have already priced in good news on earnings.
That means companies have to "not just meet expectations" but also "exceed them" in order to really drive outperformance.
Yes, but: Sosnick adds that investors have seen this movie before.
Some CFOs had to reforecast daily during the coronavirus pandemic, said Chris Wright, a managing director at global consulting firm Protiviti.
"There's muscle memory there," he told Axios.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
6 minutes ago
- Yahoo
AMD Could Add Billions in AI Revenue -- BofA Just Raised the Target
July 30 - Bank of America Securities raised its price target on Advanced Micro Devices (NASDAQ:AMD) to $200 from $175, citing strong momentum in artificial intelligence and CPU markets ahead of the company's fiscal Q2 earnings report. The new target implies a nearly 13% upside from recent levels. Warning! GuruFocus has detected 5 Warning Signs with AMD. BofA analyst Vivek Arya, who maintained a Buy rating, expects AMD to gain significant market share in CPUs and AI GPUs through 2026. The firm's current share of the CPU market remains under 20%, but Arya anticipates this figure will exceed 30% by 2026. Arya also highlighted growing GPU opportunities, especially following improved trade dynamics with China. AMD is projected to resume AI GPU shipments to the region in the second half of 2025, potentially generating $700 million to $1 billion in added revenue next year. Strong pricing for AMD's MI355X GPUs, currently exceeding $20,000 per unit, also supports the bullish outlook. Arya expects Q2 revenue to slightly exceed consensus at $7.5 billion. Full-year 2025 projections from BofA also came in above Street estimates, with $33 billion in revenue and over $4.10 per share in adjusted earnings. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
USA Today
7 minutes ago
- USA Today
GDP soars and Trump's economy roars. Liberals still won't give him credit.
Will Democrats put politics aside and applaud as the American economy shows a strength and resilience that so many of them doubted? Probably not. Thanks to President Donald Trump's bold policies, it appears that the United States will avoid a recession this year − one that so many liberals were predicting only months ago. Will Democrats put politics aside and applaud as the American economy shows a strength and resilience that so many of them doubted? Probably not. The Bureau of Economic Analysis on July 30 released more good news about our nation's vibrant economy. Gross domestic product grew a healthy annual rate of 3% in the second quarter after recording a less than 1% decline in the first three months of this year. Fears of a recession should now dissipate like morning haze after the sunrise. Nearly all markers of a strong economy are in top form. Unemployment is low, hovering at 4.1%. The past three months have seen steady job growth. Average hourly earnings for U.S. workers grew 3.7% over the 12 months ending in June. Consumer spending is expected to rise, and there's been a modest uptick in consumer confidence. The Consumer Price Index, which measures inflation, increased 2.7% over the 12 months ending in June, far below the 40-year high recorded in President Joe Biden's term. Even the average price of eggs has dropped dramatically, to $3.31 per dozen, down from a spike to $8 in February and back to roughly the same price level as a year ago. Stock indexes continue to grow at a strong pace, recovering from the sell-off this spring driven by concerns over Trump's tariffs. The Nasdaq and S&P 500 have set multiple record highs in July, a boon to millions of Americans with retirement accounts and other investors. On the tariff front, Trump's new trade deal with the European Union should be a catalyst for further economic growth, particularly in the energy and construction sectors. If this is what a recession looks like, let's keep it coming. Critics said Trump was destroying the economy Despite such healthy economic markers, I doubt I'll see many kudos offered to the Trump administration for powering past a recession, which the left predicted in doomsday terms. Nobel Prize-winning economist Paul Krugman wrote in May that Trump and "MAGAnomics" were "destroying the economy and waging war on the middle class and the poor." The headline thundered that Trump was "making America backward again." Opinion: Trump's EU trade deal ushers in a golden age for blue-collar workers Interestingly, Krugman claimed that the U.S. economy was in good overall shape when Biden left office in January. He charged Trump with wrecking the economy in a mere three months. Now, that the data clearly shows otherwise, will Krugman admit his errors? I doubt it. Krugman, to be fair, wasn't the only so-called expert spouting off about our supposedly crumbling economy. CNN published an analysis in April with a headline that claimed "Trump took the US economy to the brink of a crisis in just 100 days." That same month, the Center for American Progress bemoaned that "President Donald Trump's decision to unilaterally launch a global trade war could be one of the worst economic statecraft blunders in American history." I read these articles in the mainstream news media and wonder if we share the same universe. Do progressives not see the same healthy economic markers that millions of other Americans and I see? The answer, of course, is that they do see − but they are too blinded by partisanship to admit it. Good economic news should be nonpartisan I don't have a problem with liberals criticizing Trump. Sometimes he deserves it. But when it comes to obvious wins like a blossoming economy, the constant derision is tiresome and pedestrian. A robust economy under any president is good news for Americans, regardless of their party affiliation. Right? I didn't care for Biden's leftist policies. But I didn't cheer when the economy struggled. It was bad news not just for Biden but, far more important, also for our nation and its citizens. More than a year after Biden entered the White House, annual inflation spiked to 9% in June 2022, the highest rate in four decades. Americans were hit with sudden increases in food, housing and transportation costs. Opinion: Nvidia CEO says Trump gives America an advantage. Hear that, progressives? Compounding the pain, the Federal Reserve acted to cool inflation by raising interest rates, which pushed up consumers' payments for auto, housing and credit card loans. Democrats tried to blame decisions made in Trump's first term, including federal spending used to fight consequences of the COVID-19 pandemic. But Biden spent more even as the pandemic began to wane. In 2024, more than half of American voters said the economy was the issue that mattered to them the most. It's why Trump won more than 77 million votes and returned to the White House. Now, he is delivering on his promises to rebuild our nation's economy. But not everyone is happy about it. It's too bad liberals can't separate economic success from Trump's party affiliation. I can't help but wonder if they wanted a recession so they could blame Trump even more. Nicole Russell is a columnist at USA TODAY and a mother of four who lives in Texas. Contact her at nrussell@ and follow her on X, formerly Twitter: @russell_nm. Sign up for her weekly newsletter, The Right Track, here.
CNBC
9 minutes ago
- CNBC
The stock market is entering a seasonal dead zone
The market is soon entering a period when there historically have been no moves to the upside on average. Data from Wolfe Research this week finds that the S & P 500's monthly total return for August and September since 1990 has averaged a decline of 0.3% and 0.7%, respectively. That's in stark contrast to July and the succeeding months October, November and December, all of which have seen an average gain of at least more than 1%. Stocks have been roaring higher, bolstered by strong quarterly results from companies like Alphabet . The broad market index notched its fifth consecutive closing record on Friday and finished above 6,300 for the first time last Monday. The S & P 500 is currently on pace for a nearly 3% jump month to date, almost double the historical average return of 1.5% for July. Year to date, the index has risen more than 8%. "As markets continue to hit new all-time highs, we expect to see a consolidation post earnings season as stocks enter into a historically weaker period," Chris Senyek, chief investment strategist at Wolfe, wrote in a note dated Tuesday. .SPX mountain 2025-07-01 S & P 500, month-to-date A more hawkish signal from the Federal Reserve at the end of its two-day policy meeting Wednesday may increase this consolidation, Senyek said. Fed funds futures traders largely expect the central bank to keep its benchmark overnight borrowing rate steady in a range of 4.25% to 4.5%, per CME's FedWatch tool . "With the growth outlook for the U.S. remaining solid and tariff policy working its way through to consumer prices, we expect the FOMC to hold rates steady at this week's meeting," he wrote. "Our sense remains that the biggest risk to stocks in the back half of the year is stickier inflation keeping rates much higher than the futures market currently expects!" Alongside the Fed, the strategist believes a weaker-than-expected nonfarm payrolls reading for July on Friday, signs of sticky inflation in the wake of Thursday's personal consumption expenditures price index report and disappointing earnings reports and spending expectations for artificial intelligence-related stocks could serve as catalysts. Semiconductor company Qualcomm and "Magnificent Seven" companies Meta Platforms and Microsoft are all set to report Wednesday after the bell. Others such as Amazon and Apple are slated for Thursday.
