Key Takeaways
- An analysis of earnings call transcripts by FactSet showed that S&P 500 companies are less worried about a recession.
- During the first quarter, 29 companies said the word “recession” during their earnings calls, much lower than the five-year average of 83.
- BofA Securities predicted a strong second half of the year for corporate earnings as companies embrace a “soft landing” scenario.
A recent study of earnings calls by S&P 500 companies has shown mentions of the word “recession” have declined for a seventh consecutive quarter.
FactSet studied earnings call transcripts by all of the S&P 500 companies from March 15 through June 6 for mentions of the word “recession.” Only 29 of those firms cited the term, which was much lower than the five-year average of 83 and the 10-year average of 60. This was also the lowest number of “recession” mentions since the fourth quarter of 2021.
The survey noted that the financials and industrial sectors had the highest concern about “recession,” with 11 and seven mentions, respectively.
Analysts Increasingly Confident of ‘Soft Landing’
FactSet also noted that the term “soft landing” was used on the first-quarter earnings calls of 13 S&P 500 companies. Analysts are increasingly confident that the economy can continue to weather higher interest rates and stubborn inflation without a risk of recession.
In its latest Earnings Tracker report, Bank of America (BofA) Securities predicted a strong second half of the year for corporate earnings per share (EPS). Analysts said that despite some weakness in the low-income consumer and services, “the hard data suggests the consumer as a whole is still healthy.”
BofA said that a strong labor market and signs of growth in the manufacturing sector should propel earnings higher. A broadening of EPS gains is also expected outside of the “Magnificent Seven” stocks as other sectors catch up to cost-cutting measures.