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Market Update: 8-14-17


Burt White Chief Investment Officer, LPL Financial | Jeffrey Buchbinder, CFA Market Strategist, LPL Financial

Corporate America delivered another outstanding earnings season, with double-digit earnings growth, solid upside to forecasts, and generally upbeat outlooks from corporate management teams. We have been particularly impressed with the breadth of earnings gains and upside to revenue forecasts. Strong earnings continue to provide support for the stock market at elevated valuations, with the potential for more support from a reduced corporate tax rate next spring. Here we provide an overview of the nearly completed second quarter 2017 earnings season.


With about 90% of the S&P 500 Index companies having reported results, earnings growth is tracking to a 12% year-over-year increase, the second straight doubledigit gain [Figure 1]. The earnings beat rate of 74% is nicely above the five-year average (68%). Although the 4% upside to June 30 estimates (12% versus 8%) is only about 1% above the long-term average upside, we are impressed with this result coming off the strong first quarter. The breadth of the earnings gains is also notable, with energy, financials, and technology each contributing 18% or more to the overall increase in S&P 500 earnings [Figure 2]. The consistency with which companies have beaten estimates is also impressive, even when considering the historical pattern of consensus estimate reductions that give companies a lower bar. Earnings have beaten consensus estimates for 33 consecutive quarters, covering much of the current economic expansion (based on Thomson data)....

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