RBC Capital Markets strategists, in a note penned by the team led by Lori Calvasina, say weaker trends in earnings revisions among S&P 500 companies are likely a factor behind recent choppy trading in the benchmark index.
The research team described the current reporting period as "slightly squishy," suggesting that the uneven price action seen in the S&P 500 is not solely the result of geopolitical concerns. Instead, RBC points to deterioration in company-level earnings momentum as an explanatory element for the market's fitful performance.
Key metrics cited by the strategists include:
- The proportion of upward earnings-per-share (EPS) estimate revisions for S&P 500 companies is currently 51.4% - well below the 65% peak recorded last September.
- The percentage of companies reporting results that beat EPS expectations has fallen to 77%, down from 82% in the prior quarter.
Calvasina and her colleagues also cautioned that the latest statistics do not yet reflect recent results from mega-cap growth companies, which could alter the picture once incorporated.
On the forecast front, RBC highlighted that the bottom-up consensus for 2026 EPS has steadied and is slightly above $313, which translates to an implied growth rate of roughly 13%. That represents only a marginal improvement versus the projected 12% growth rate for 2025, according to the strategists.
The team added that, based on their review of company conference calls, executives have not been raising material new concerns about the macroeconomic backdrop. Still, RBC's broader gauge of earnings sentiment "continues to look weak," Calvasina noted.
Calvasina maintained a constructive stance on U.S. equities for the year, while cautioning that returns will "likely be anchored to and reflective of earnings growth, with little in the way of moves in the P/E multiples."
In sum, RBC sees a mixed set of signals: softer earnings-revision dynamics and a dip in beat rates that help explain jittery market behavior, alongside a stabilized multi-year EPS consensus that points to continued, if modest, earnings expansion.
Implications - The observations from RBC link the market's uneven pricing action to company-level earnings momentum rather than to a single external factor, and suggest future equity returns may be more dependent on actual earnings outcomes than valuation expansion.