Stocks to Invest in 2025: The Earnings Season is Looking Surprisingly Good

The current earnings season is shaping up to be quite remarkable, with many companies exceeding expectations and experiencing significant stock price jumps. While it is still too early for a full review, the preliminary data suggests a strong performance across the board. This is not a term used lightly, but the numbers look good; perhaps even surprisingly good.

 

The Impact of Earnings Surprises

• Positive Surprises: Companies that have exceeded both earnings and sales estimates have seen their shares rise by an average of 3.6%. This is a significant jump, indicating that the market is rewarding companies that outperform expectations.
• Punishment for Misses: On the flip side, companies that have missed their estimates are being punished more than usual, with larger-than-normal drops in their stock price.
• Algorithmic Trading: The article notes that algorithmic traders may already have capitalized on the combination of earnings surprises and immediate price jumps.

 

A Prereview of the Season

The article emphasizes that it is not yet time for a full review of the earnings season, but the early signs are very encouraging. The numbers are looking strong, and the market is reacting accordingly. This is particularly noteworthy because companies have been carefully managing expectations for years.

 

Examples of Companies with Surprising Results

• Amphenol: The article specifically mentions Amphenol, a company that manufactures connectors, sensors, cables, antennas, and other components. Shares of Amphenol rose by 7% after the company reported a 30% increase in fourth-quarter revenue in U.S. dollars (or 20% excluding acquisitions). This growth was driven by strong demand from data centers, commercial aviation, and industrial customers. A Truist Securities analyst even remarked that they needed to "get out the magnifying glass" to find weak points, which were largely confined to Europe.
• Other Companies: While not individually named, the article implies that many other companies have delivered similar positive surprises, leading to the overall positive sentiment surrounding the current earnings season.

Implications for Investors

• Opportunities: The article suggests that the current earnings season could present opportunities for investors who are able to identify companies that are beating expectations and experiencing positive price movements.
• Risk: Conversely, there is a higher risk with companies that do not perform well as they are punished more than usual.
• Algorithmic Impact: Ordinary investors may find it difficult to capitalize on the information related to immediate price jumps following earnings beats because algorithmic traders are already acting on that data.

The current earnings season is off to a promising start, with many companies reporting strong results and experiencing significant stock price increases. While it is still early days, the prereview of the numbers shows a positive trend that investors should be aware of. It is important to note that while the article highlights the positive surprises, the market is also punishing companies that fail to meet expectations more severely. The article suggests that a combination of earnings and price jumps can be an indicator of future returns, but that ordinary investors may find it difficult to capitalize on that information.