The first quarter of this year is fast receding in the rear-view mirror. Before we say goodbye, we must affirm that once again the financially strong companies in the Barron’s 400 Index posted stronger profits and revenue growth than their counterparts in the Standard & Poor’s 500.
The margin of outgrowth year over year was more than 200 basis points in per-share profit and nearly 300 bps in revenue, as these figures show:
| Median Reported EPS Vs. | Median Reported Revenue Vs. | |||
| Estimate | 1Q 2018 | Estimate | 1Q 2018 | |
| Barron’s 400 | 4.22% | 9.43% | 0.21% | 5.17% |
| S&P 500 | 4.58% | 6.93% | 0.15% | 2.22% |
Security analysts were remarkably prescient in their revenue forecasts, which the companies beat by only a sliver. However, they were too pessimistic about per-share profits. They lowered their estimates too much amid anecdotal indications of slower growth in the global economy.
| Median Estimates Over Previous Six Months | ||
| EPS | Revenue | |
| Barron’s 400 | -10.61% | -4.72% |
| S&P 500 | -10.93% | -4.92% |
Year-over-year sector growth in per-share earnings favored the Barron’s 400, as might be expected. But the S&P 500 outperformed in consumer staples, health care, materials and utilities. This was the first time in many quarters that the S&P 500 came out ahead in more than one or two sectors. Analysts’ forecasts were especially off the mark in energy.
| Barron’s 400 | S&P 500 | |||
| Median Reported EPS Vs. | Median Reported EPS Vs. | |||
| Med. Estimate | Med. 1Q 2018 | Med. Estimate | Med. 1Q 2018 | |
| Consumer Discretionary | 6.46% | 7.89% | 6.52% | 3.72% |
| Consumer Staples | 6.60% | 1.50% | 5.37% | 3.34% |
| Energy | 7.29% | 0.00% | 10.44% | -8.70% |
| Financials | 1.56% | 9.73% | 6.31% | 9.16% |
| Health Care | 2.60% | 7.96% | 3.73% | 8.45% |
| Industrials | 5.36% | 14.95% | 5.25% | 7.91% |
| Materials | 1.81% | -1.22% | 4.66% | 9.71% |
| Technology | 6.71% | 10.79% | 3.51% | 7.00% |
| Telecommunications | N.A. | N.A. | 2.82% | 2.56% |
| Utilities | -2.34% | 2.11% | 0.59% | 2.66% |
In revenue, S&P 500 superiority was held to two sectors, financials and utilities. Financials also was the sector in which the Barron’s 400 posted its only year-over-year decline. Analysts’ revenue predictions were generally accurate, except for Barron’s 400 utilities.
| Barron’s 400 | S&P 500 | |||
| Median Reported Revenue Vs. | Median Reported Revenue Vs. | |||
| Med. Estimate | Med. 1Q 2018 | Med. Estimate | Med. 1Q 2018 | |
| Consumer Discretionary | 0.44% | 6.78% | 0.02% | 2.67% |
| Consumer Staples | 0.43% | 5.80% | 0.08% | 2.20% |
| Energy | 1.47% | 7.35% | 0.88% | 0.30% |
| Financials | -0.69% | -3.26% | 0.40% | 1.05% |
| Health Care | 0.92% | 6.88% | 0.48% | 4.36% |
| Industrials | 0.13% | 6.98% | 0.18% | 2.87% |
| Materials | -0.37% | 1.48% | -0.91% | 0.69% |
| Technology | 0.75% | 7.44% | 0.18% | 3.49% |
| Telecommunications | N.A. | N.A. | -0.66% | 1.12% |
| Utilities | -7.54% | 3.35% | 0.92% | 4.28% |
The largest companies in both indexes—presumably the ones with the greatest global exposure—drove performance. Deserving a raised eyebrow is the S&P 500’s year-over-year non-gain in per-share profits and 2% decline in revenue for large-capitalization stocks.
| Median Reported EPS Vs. | Median Reported Revenue Vs. | ||||
| Mega Cap (>$10 billion) | Estimate | 1Q 2018 | Estimate | 1Q 2018 | |
| Barron’s 400 | 5.16% | 11.40% | 0.69% | 8.30% | |
| S&P 500 | 4.69% | 7.42% | 0.23% | 3.15% | |
| Large Cap ($3 bln-$10 bln) | |||||
| Barron’s 400 | 3.95% | 10.84% | -0.35% | 4.18% | |
| S&P 500 | 4.48% | 0.00% | -0.32% | -2.04% | |
| Mid Cap ($1 bln-$3 bln) | |||||
| Barron’s 400 | 3.41% | 7.14% | 0.04% | 1.02% | |
| S&P 500 | N.A. | N.A. | N.A. | N.A. | |
| Small Cap ($500m-$1 bln) | |||||
| Barron’s 400 | 9.27% | -2.96% | 0.19% | 2.55% | |
| S&P 500 | N.A. | N.A. | N.A. | N.A. | |
| Micro Cap (< $500 mln) | |||||
| Barron’s 400 | 3.71% | 5.56% | 0.35% | 13.88% | |
| S&P 500 | N.A. | N.A. | N.A. | N.A. | |
It was not the most spectacular of quarters, but it turned out better than many expected. The data show the unmistakable link between the financial vigor of the Barron’s 400 companies and their exceptional growth.
