A Ray of Hope Emerges as More US Companies Offer Earning Guidance

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Earning guidance is once again being offered by many companies in the US, as earning season proceeds in full swing. This is a potent signal to investors that companies are adapting to the novel challenges posed by the pandemic. As the end of the current health crisis is uncertain, critical times may continue well into the next year. This boost in earning guidance suggests that some corporations have adapted to the crisis.  73 companies in the S&P 500 have offered earning guidance this quarter. This is an increase from the previous quarter that accounted for 65 pre-announcements. However, according to Refinitiv data, the current number is not very impressive when compared to the usual 170 companies that generally offer guidance every year. Offering earning guidance is a signal to show that companies have devised certain plans and strategies to navigate these critical times.

Optimism Displayed

There has been visible ray of hope among investors in the recent months even as times become critical with the ongoing pandemic and the impending national elections. A survey conducted by UBS Global Wealth indicated a rise in the sense of optimism for the economy among companies in the last three months to 50% from the previous 41%. It also recorded an enhanced sense of optimism in stocks among US companies over the same time period. This rate went up from 44% to 55%. Companies like Microsoft Corp, Pinterest Inc. are scheduled to report their results next week.  This will be clearly the busiest period of the earnings season for all investors. Reports state that nearly 86% of companies that have reported earnings so far have fared much better than the numbers predicted by analysts.

Weathering the Storm

The S&P 500 companies are projected to record a 25% average earnings growth rate next year. Companies that are showing signs of positive development and offering earning guidance are also expected to endure the higher corporate tax rates, if the US witnesses a change of leadership, post its Presidential Elections. Charlie Ripley, Senior Investment Strategist at Allianz Investment Management was quoted saying, ‘If a company is able to offer guidance it shows that they’re able to have a better idea of what’s coming down the road.”