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Thursday, April 15, 2021
Wall Street estimates still can't keep up with corporate results
Big banks are kicking off first quarter earnings season this week — and the early returns suggest that even with almost non-stop upward revisions, Wall Street analysts still cannot keep up with where corporate results have trended over the last several months.
On Wednesday morning, results from JPMorgan (JPM), Wells Fargo (WFC), and Goldman Sachs (GS) all blew away estimates. And while the business mix of each firm puts them at the intersection of a slightly different part of the banking industry, all three showed they are far outperforming the Street's estimates for the first quarter.
Among those leading the three firms on Wednesday, JPMorgan CEO Jamie Dimon had the most expansive comments. He said in the company's earnings release that "consumer spending in our businesses has returned to pre-pandemic levels, up 14% versus the first quarter of 2019."
Dimon added that "euphoria around the potential end of the pandemic" could send the economy on a path towards enjoying "extremely robust, multi-year growth."
A year after the hottest topic of conversation was what shape the economic recovery would be, as far as markets and corporate results are concerned, a "V-shape" is now obvious.
As first quarter earnings season unfolds during the weeks ahead, we'll see how much follow through there is from the signals Dimon's business is sending about the state of the recovery, and by extension the rest of the corporate world. If the old line that says banks are a levered bet on the economy is anything to go by, then results should be strong.
But even after a year in which earnings expectations powered markets to record highs, we've still not seen consensus estimates fully catch up. That is a notable inversion of the typical dynamic where management teams manage expectations down only to beat a lowered bar.
All of which serves as another reminder of the strange market environment we're still living in.
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