Earnings Update

This week we saw a large number of companies report earnings.  As of this morning, 26% of companies in the S&P 500 have reported.  Of those that have reported, 76% have exceeded the mean estimate for Earnings Per Share (EPS) while 55% have exceeded revenue expectations.  The 76% EPS beat is above the five-year average while the 55% revenue beat is below the five-year average.  Thus far, the average company has beat earnings estimates by 3.5%, trailing the five-year average of 4.2%.  Though the dollar hasn’t strengthened much, multiple companies that have already reported earnings have attributed negative earnings impact due to a sustained stronger dollar.  The chart below breaks down the earnings by sector for the companies that have reported thus far this quarter.  Health care and materials are the “leaders” so far in this young earnings season, while the energy sector has the highest percentage of companies missing estimates.

Next week is one of the bigger weeks on the earnings calendar.  187 companies in the S&P 500 are scheduled to report, nine of which are Dow Jones companies.  A few companies scheduled to report include Express Scripts (ESRX), Halliburton (HAL), 3M (MMM), Apple (AAPL), AT&T (T), Freeport McMoRan (FCX), Procter & Gamble (PG), Boeing (BA), Amazon (AMZN), Cheniere Energy (LNG), Ford Motor (F), Gilead Sciences (GILD), MasterCard (MA), Chevron (CVX), Exxon Mobil (XOM), and Ventas (VTR).

 

Housing Data

Home sales in the U.S. were higher than expected in March providing a good start to the Spring.  According to the National Association of Realtors, existing home sales increased 5.1 percent compared to expectations for a 3.5 percent increase.  Sales rose in all four major regions of the U.S., with the Midwest increasing 9.8 percent.

An improving labor market aided in mortgage applications rising to their highest levels in over two months. While the lower than usual inventory of homes for sale has constrained momentum, the new data shows signs of confidence for the economy and continued low interest rates should provide sustainability in the housing market.

 

Deadline to File & Suspend

April 30th is the deadline for the elimination of the file and suspend strategy for Social Security benefits.  This will mark the end of the 6 month extension of this option since the new laws were enacted last Fall under the Bipartisan Budget Act of 2015.  The file and suspend strategy was available for those who are full retirement age (66) or older and allowed the higher earning spouse to file for their benefits at their full retirement age and then suspend their benefits to allow their benefit amount to continue to grow until they elected to collect at a later age.  By doing so this allowed their spouse to collect benefits based on the primary spouse’s record.

Under the new rules, if the primary spouse suspends their benefits, then all benefits payable on their record are suspended.  Therefore the primary spouse will have to begin collecting benefits for their spouse to receive any spousal benefits.

If you were at least 62 at the end of 2015 and have yet to file for Social Security, you still have the restricted application available to you for several years.  But anyone who was younger than 62 at the end of 2015 will not be able to collect only spousal benefits due to the deemed application rule.  One exception…surviving spouses will continue to be allowed to restrict their application and are eligible to start collecting their survivor benefits as early as age 60, while delaying collection of benefits based on their own record.

 

This publication is provided as a service to our clients and associates of PFA solely for their own use and information.  The material is derived from sources believed to be reliable but its accuracy and the opinions based thereon are not guaranteed and have not been verified.  The content in this publication is for general information only and not intended to serve as individual investment advice.  You should seek independent advice from a professional based on your individual circumstances.