Earnings Scoreboard - Is the Iran premium priced into US refining?

 

Renée Friedman, Global Head of Research

Horacio Coutino, Multi-asset Strategist

“We woke up this morning with a very different set of fuel assumptions than we had when we went to bed... And so, until we have a better sense for where structurally we see oil landing, which we do believe will be higher for longer... we'll be in a better opportunity to guide.”

— Edward Herman Bastian, CEO of Delta Air Lines, Q1 earnings call, on 8 April. Who’s scoring highest and why

From 28 April to 5 May, 226 S&P 500 companies (including 10 Dow Jones Industrial Average constituents, Amazon, Amgen, Apple, Caterpillar, Chevron, Coca-Cola, Merck & Co, Microsoft, Sherwin Williams and Visa) reported earnings. According to FactSet, with 62.4% of the S&P 500 having reported as of 1 May, the blended Q1 earnings growth rate has accelerated to 27.1%, more than double the 13.1% pace anticipated at quarter-end and the highest quarterly growth rate since Q4 2021, when the index posted 32.0%. Revenue growth has likewise climbed to 11.1%, the strongest top-line print since Q2 2022, and the blended net profit margin of 14.7% is on track to be the highest since FactSet began tracking the metric in 2009. Furthermore, 83.1% of reporting companies have beaten EPS expectations against the prior four quarter average of 78.1%, and the aggregate earnings-surprise factor of 20.7% is the highest since Q1 2021.

The composition of the beat is, however, unusually concentrated. Alphabet's positive EPS surprise was 90.5% (actual $5.11 vs. $2.68 consensus), Amazon's was 70.2% and Meta Platforms' 55.9%, each above their respective five-year averages. Communication Services, which houses Alphabet and Meta, has swung from a projected 3.8% earnings decline at quarter-end to 53.2% growth today, Information Technology now stands at 50.0% earnings growth. Excluding the Magnificent Seven, the index’s earnings growth rate is 16.4%, and Energy and Health Care remain the only two sectors reporting y/o/y earnings declines of 3.9% and 4.5%, respectively.

This week, sector-defining names report across energy refining, AI-power utilities, travel and consumer, the gig-economy, AI hardware, agricultural commodities and managed care. A key question is, can sectors more directly exposed to Iran-conflict oil-cost pressure (refiners, consumer staples, airlines) and post-IEEPA tariff dynamics (legacy industrials, agricultural inputs, retail health) deliver the upside surprises that the consensus growth trajectory still requires?

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