Argus

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May 14, 2026

Market Outlook

Bullish

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Short

Summary

Earnings season is winding down and the overall growth rate is set to land in the mid-teens range, above our forecast for 10%-12% growth. Earnings typically do beat expectations, but let's take a closer look. An impressive 84% of companies beat the EPS consensus, ahead of the average 67%. Notable contributions have come from IT (rising 53%), Communication Services (55%), and Consumer Discretionary (23%). The only negative sectors were Energy (with a 2% decline) and Healthcare, (off 3%). There are three drivers to EPS growth: higher sales, a wider operating margin, and a lower share count. A decline in shares, the result of share buybacks, is the lowest-quality driver of growth. Higher sales, as customers demand and pay for more products and services, is the highest quality, especially when sales are driven by an increase in volume. (First-quarter revenue growth has been about 11%, or approximately 900 basis points above long-term U.S. GDP growth, which is extraordinarily healthy.) Margin management is in the middle.  Consistently wider margins, quarter after quarter, are often a sign of a good management team that should be able to grow revenues faster than costs. That's a bit of a tall order in periods of rising inflation, which raises the prices of Cost of Goods Sold, and of high interest rates, which result in higher financing costs. What's more, there's a cap to margins as they don't rise indefinitely. (That is one of those statistics for which the concept "reversion to t

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Technical Assessment: Bullish in the Intermediate-Term

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