Plaudits now rare for CEOs on tougher earnings calls this year
Wall Street analysts are dialing back on the compliments paid to Corporate America at the fastest clip in years.
«Good quarter,» «congratulations» and similar plaudits are drying up on quarterly earnings calls for S&P 500 companies, setting up 2023 for the biggest such annual decline since the Great Recession. The drop is even more pronounced when compared with the pandemic era, running 35% below the average pace in the previous three years.
Analysts have gone cold on corporate executives as they climb a wall of worry that includes soaring labour costs, surging prices for raw materials, rising borrowing rates and heightening geopolitical tensions that have shown no signs of abating.
«Fewer companies are doing well,» said Alex Zukin, an analyst covering software companies at Wolfe Research.
«There's a higher volume of companies that are in a difficult environment really for the first time.»
It's not that the recent quarterly results have been atrocious — in fact, 82% of S&P 500 members that have issued results so far topped analysts earnings expectations by an average of 7.6%, according to data compiled by Bloomberg, about double the average beat last year.
Still, even when the numbers are good, analysts may refrain from complements when the economic backdrop appears to be deteriorating. «There's some sensitivity around giving someone a pat on the back in a tougher environment,» Michael Turrin, an analyst covering enterprise software stocks at Wells Fargo, said in an interview.
The slump in congratulatory remarks may point to increasingly concerned investors heading into 2024 as the risk of inflation remains sticky, potentially putting more pressure on policymakers.
