Investing.com -- As the first-quarter earnings season nears completion, JPMorgan analysts say the market’s reaction to earnings results has been notably skewed, with underperforming companies facing steeper-than-usual penalties.
“Companies missing estimates are being penalized by more than typical, while those beating estimates are being rewarded by less than average,” JPMorgan wrote in its final Q1 earnings tracker.
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They note that nearly 90% of companies in both the U.S. and Europe have reported results.
Despite that muted stock reaction, earnings performance was solid. JPMorgan explained that in the U.S., earnings per share grew 12% year-over-year, with an 8% surprise factor relative to expectations.
In addition, they stated that in Europe, EPS declined 2%, though that still marked a 4% surprise. Excluding the energy sector, which weighed heavily on both regions, U.S. EPS growth rose to 14%, and European growth turned positive at 2%.
JPMorgan said that Communication Services, Healthcare, Discretionary, Tech, and Utilities led the U.S. earnings strength. In Europe, performance improved to 5% growth when both Energy and Autos were excluded.
“The spread between Mag-7 and S&P 500 ex-Mag-7 EPS growth has narrowed, [but] it is still robust, at +20% y/y,” the bank’s analysts said, referencing the concentrated strength among a few large-cap U.S. tech stocks.
Still, the outlook is said to remain cautious. “Corporate guidance for 2025 profit outlook is relatively subdued, with the proportion of companies raising EPS guidance down again this quarter,” JPMorgan said.
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