Investors Penalize S&P 500 Earnings Misses the Most Since 2016

(Bloomberg) -- U.S. companies that miss their numbers this earnings season are feeling the sting more than usual. Investors are punishing those that fall short of second-quarter estimates more than they’re rewarding the ones that exceed them by the widest margin in almost two years.

S&P 500 stocks of companies that beat top- and bottom-line estimates last week outperformed by a lower-than-average 1.5 percentage points, while those that came up short underperformed by an unusually high 3.6 percentage points, data compiled by Bank of America Corp. show. That’s the widest performance gap between winners and losers in seven quarters.

Living up to, let alone exceeding, Wall Street’s expectations has become a bigger challenge for companies as the market plows toward its longest bull run ever and analysts continue to boost their growth estimates. Last quarter’s earnings expansion, the fastest in almost a decade, came in 6.6 percent above expectations. But for companies, that meant a 0.4 percent average retreat one day after the results, data compiled by Bloomberg show.

So far, only about half the S&P 500 companies have released their results. As of Monday, quarterly earnings are on aggregate 5.2 percent above expectations, and the one-day average reaction post earnings has been a 0.5 percent increase.

To contact the reporter on this story: Elena Popina in New York at epopina@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Richard Richtmyer, Brendan Walsh

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