Welcome to another week of Hypergrowth Investing, folks! With earnings season underway, we’re laser-focused on companies’ first-quarter results and what that means for stocks going forward.

As we’ve mentioned previously, in the first three months of this year, both the labor market and consumer spending were quite resilient. And those two factors should support strong revenues in the first quarter of 2023. Consequently, we think we’re going to see a lot of revenue beats this earnings season. 

At the same time, we’ve seen a lot of companies announce layoffs, shelve certain projects, and implement various other cost-cutting measures to shore up their spending. And those developments should support better-than-expected margins this quarter.

Better-than-expected revenues + better-than-expected margins = better-than-expected earnings.

So, if we’re likely to see pretty robust Q1 earnings, the real question is, what will the guidance look like for Q2 and FY23?

Right now, analyst estimates are stabilizing around $218 per share for the S&P 500 for 2023 and $240 per share for the S&P for 2024. Will those numbers rise or fall? That’s what will determine the short-term trajectory for stocks. 

We’re optimistic that earnings will help to push EPS higher, creating a path for stocks to do the same. And with more soft inflation data and a Fed pause on deck, stocks have the potential to reach new cycle highs into the summer.

Get ready for a rally!

On the date of publication, Seth Kuczinski did not have (either directly or indirectly) any positions in the securities mentioned in this article.