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Futures have a positive tone heading into the trading day as investors still look ahead to Wednesday’s CPI and then the start of earnings season later this week. The only economic report of note today was small business optimism from the NFIB which came in stronger than expected (91.0 act vs 89.8 est). International stocks are also broadly positive with gains of around 0.5% or more depending on the country/region. The notable laggard is the UK, which is down 0.1%.

Gearing up for the start of earnings season later this week, we thought it was worth highlighting the rebound in earnings and revenue results relative to expectations over the last three months. The chart below comes from our Earnings Explorer and shows the EPS and revenue beat rates on a three-month rolling average basis. In the aftermath of COVID, when the stimulus hose was flowing from both the fiscal and monetary faucets, beat rates surged to record highs. As the hose was turned off, the pace of beats among US companies also slowed, and by early this year was trending back down towards pre-COVID levels.

The last three months, though, have seen a reversal of that trend as analyst forecasts simply turned way too bearish and set the bar unrealistically low. As things stand now, the EPS beat rate is nearly 10 percentage points above its long-term historical average while the sales beat rate is close to 15 percentage points above its long-term average. From some perspective, outside of the post-COVID period, the current pace of EPS and sales beats would be right around the highest levels of the last twenty years.

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