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S&P 500 first-quarter EPS creeps out of the red, Refinitiv data shows

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By Noel Randewich

(Reuters) – Who said corporate earnings were down?

Fresh data shows earnings per share for S&P 500 companies were about flat in the first quarter, a major improvement over dour forecasts at the start of the reporting season.

With first-quarter earnings season all but wrapped up, S&P 500 companies are on track for an average increase in earnings per share of 0.03% year over year, according to I/B/E/S data from Refinitiv. By comparison, analysts in early April, before most companies reported, on average had forecast a 5.1% drop, while earnings per share in the fourth quarter of 2022 sank 3.2%.

Notably, net income for S&P 500 companies fell 2.9% in the first quarter, according to Refinitiv, showing their overall profits actually declined. The flat EPS in the same quarter reflects the repurchasing of stock by companies, which increases the earnings per each of their remaining shares.

Worries about a potential U.S. recession as the Federal Reserve raises interest rates to fight inflation have weighed heavily on investor sentiment, and companies reporting their results in recent weeks reinforced those concerns.

But corporate results mostly were better than predicted, even as executives warned of economic storm clouds ahead. Nearly 77% of companies reported earnings above analysts’ estimates, better than the beat rates of 74% in the previous four quarters and 66% over the long-term period, according to Refinitiv.

A week ago, first-quarter earnings per share were on track for a 0.01% dip. J.M. Smucker and Campbell Soup Co were among the companies helping to lift S&P 500 earnings out of negative territory in recent days, with both packaged food sellers reporting EPS above analysts’ estimates.

J.M. Smucker’s stock has climbed 2.5% since the Jif peanut butter maker on Tuesday forecast a smaller-than-expected decline in annual revenue, betting on higher prices and steady demand for its ready-to-eat meals and snacks. Campbell Soup’s stock has tumbled more than 8% since its report on Wednesday, when it disappointed investors by maintaining its full-year forecasts for sales and profit despite beating quarterly earnings expectations.

While first-quarter earnings have turned out better than expected, analysts on average remain pessimistic about the outlook for earnings, on average predicting a 5.4% drop in EPS in the second quarter, according to Refinitiv.

(Reporting by Noel Randewich; Editing by Paul Simao)

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