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Real Investment Advice‘s Lance Roberts writes:

Since October 2022, the stock market has traded consistently higher as earnings improved. With the first quarter earnings season behind us and the second quarter approaching, will earnings improve further? In 2021 and 2022, we wrote several articles discussing why analysts’ estimates were overly optimistic. As we head further into 2023, are analysts again becoming excessively optimistic?

According to FactSet, with the vast majority reporting:

“78% have reported actual EPS above the mean EPS estimate, which is above the 10-year average of 73%. It is also the highest percentage of S&P 500 companies reporting a positive EPS surprise since Q3 2021 (82%). In aggregate, earnings have exceeded estimates by 6.5%, which is above the 10-year average of 6.4%. It is also the highest surprise percentage reported by S&P 500 companies since Q4 2021 (8.1%).

Of course, the high beat rate is always the case due to the sharp downward revisions in analysts’ estimates as the reporting period begins. The chart below shows the estimate changes for the first quarter of 2023 from February 2022, when analysts provided their first estimates…

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