SIRI Sirius XM Holdings Inc

By Corrie Driebusch 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 25, 2019).

Many companies are beating expectations this earnings season, helping push major indexes to record levels. But for those that miss, the punishment has been more severe than usual.

That means the stakes are high during a busy earnings week in which nearly 150 companies in the S&P 500 are reporting results.

On average this earnings season, shares of companies whose results have fallen short of analysts' estimates have declined 3.2% from two trading days ahead of earnings to two sessions after the report, FactSet data through Wednesday morning show. That is more than the 2.5% average drop over the past five years.

A possible cause for the underperformance is that companies have been giving guidance either in line with or below analysts' expectations, according to Bank of America Merrill Lynch. BAML analysts say mentions of "better" or "stronger" versus "worse" or "weaker" are tracking at their lowest since the first quarter of 2016.

On Wednesday, satellite-radio company Sirius XM Holdings Inc. became one of the latest to fall into the trend, with its stock declining 7.2% after it reported a quarterly profit below expectations.

Sirius joins others such as Intuitive Surgical Inc., whose stock tumbled 7% Monday, its largest decrease since 2014, after the maker of robotic systems used in surgery reported a slightly smaller-than-expected increase in quarterly sales and missed profit estimates. Last week, Bank of New York Mellon Corp.'s shares fell nearly 10% after it reported earnings and revenue short of Wall Street's expectations. Earlier this month, Walgreens Boots Alliance Inc.'s shares lost 13% after the pharmacy chain also missed sales and earnings estimates.

In its earnings call with analysts, BNY Mellon's chief executive, Charles W. Scharf, referenced "weakness in investment management and net interest income" as a reason for the custody bank's performance during the quarter, according to transcripts of the call.

Roughly one-third of S&P 500 companies are posting their quarterly earnings this week. On Thursday, about 65 of those quarterly reports will arrive, including from tech giants Intel Corp. and Amazon.com Inc. as well as coffee chain Starbucks Corp. That is after roughly 40 S&P 500 companies, including Facebook Inc. and Microsoft Corp., reported Wednesday.

Stocks are coming off an impressive run. Following their steep drop in late 2018, U.S. stocks have rebounded sharply this year. Through Wednesday's close, the S&P 500 is up 17% in 2019, and for the first quarter the broad index posted its largest percentage gain in decades. On Tuesday, the Nasdaq Composite and S&P 500 closed at records.

This rise has come despite a potential first-quarter-earnings slowdown because of worries about the potential impact of rising wage and commodities costs and a stronger dollar. Those worries became more acute as the first quarter progressed. At the end of December, analysts anticipated S&P 500 companies' earnings would grow 2.8% from a year earlier, according to FactSet. By the end of January, they were predicting earnings would decline. By the end of the first quarter, they estimated profits had contracted 4% from a year earlier, according to FactSet. That could also be good news for stock prices, as lowered expectations make it easier for companies to beat them.

With a little more than one-quarter of companies reporting results, first-quarter S&P 500 earnings are on pace to register a contraction of 3% from the year-ago period, according to FactSet. If that holds, it would mark the first time quarterly earnings have contracted since 2016.

Through Wednesday morning, nearly 80% of S&P 500 companies that had reported earnings had surpassed analysts' estimates, FactSet data show. Among the big winners Tuesday were social-networking platform Twitter Inc., whose shares jumped 16% , their largest percentage rise since October 2017, and industrial conglomerate United Technologies Corp., whose stock rose 2.3%.

Write to Corrie Driebusch at corrie.driebusch@wsj.com

(END) Dow Jones Newswires

April 25, 2019 02:47 ET (06:47 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.