Summarizing Factset's earnings projections, and my take.

2025 Earnings Cheat Sheet: What the Market Whispered (and Yelled)

Source: FactSet Earnings Insight Report (April 25, 2025)

The Q1 2025 earnings season is shaping up to be a confidence booster for the bulls—unless you're in Industrials, then maybe hold the champagne.

Here’s your quick, no-BS breakdown:

The Big Picture

• S&P 500 earnings grew by a healthy 10.1% year-over-year, marking the second straight quarter of double-digit gains.

• Roughly 73% of companies beat EPS estimates, with actual earnings coming in 10% higher than expected on average.

• Revenue is also climbing, with 10 out of 11 sectors posting gains—led by Tech and Healthcare.

• Net profit margins held at 12.4%, a slight dip from last quarter but still within historical norms.

Forward Guidance (And the Drama)

• Analysts expect earnings to continue growing:

  • Q2 2025: +6.4%

  • Q3 2025: +8.8%

  • Q4 2025: +8.3%

• Full-year 2025 projections? +9.7% YoY growth.

• The market’s forward P/E ratio now sits at 19.8, just a touch below the 5-year average (19.9), but above the 10-year mark (18.3).

🛑 BUT: Guidance is flashing a warning sign.

• 67% of companies issuing guidance for Q2 gave negative EPS outlooks—well above the 5-year norm of 57%.

• Names like Walgreens and Delta Air Lines have withdrawn guidance entirely, citing murky macro conditions and M&A uncertainty.

Market Reactions

• Companies beating EPS? Saw a +2.4% average bump in stock price—more than double the typical post-earnings boost.

• Missed expectations? Stock dips averaged -1.9%, slightly softer than usual.

FactSet's Takeaways for Investors

• Growth is back, but investor expectations are also rising. Beating the street is getting harder.

• Sectors like Tech and Healthcare are pulling ahead. Industrials, not so much—they’re the only group showing a YoY revenue decline.

• Don’t ignore the guidance cloud: The high rate of negative outlooks could weigh on multiples if macro headwinds grow.

Cited source: FactSet Earnings Insight – April 25, 2025

My Take on FactSet’s Take:

1. Double-digit growth looks great—until you dig into guidance. FactSet cheers the 10.1% YoY earnings growth, but that’s backward-looking. What matters more is the 67% negative guidance rate for Q2—that’s a red flag. Markets are priced for perfection. Companies are subtly saying: "We don’t see that continuing."

2. The earnings beat rate is high, but that's engineered.Yes, 73% beat EPS expectations—but so what? The game of “underpromise, overdeliver” is baked into the system. What really matters is the revenue quality and margin sustainability—both of which are only modestly improving.

3. Valuation is quietly stretching.FactSet notes a 19.8x forward P/E. That’s above the 10-year average. For an index now driven by a handful of mega-cap names, this means the air is getting thinner. Unless earnings keep accelerating, the next leg up will be hard to justify.

4. Sector divergence is widening. Tech and Healthcare are pulling weight—again. Industrials are lagging, and Consumer Discretionary isn't getting much love. That’s a sign of an imbalanced recovery, not a broad one. If rates stay elevated, cyclicals could suffer more.

5. Market reaction is overly forgiving—for now.Stocks that miss estimates are only falling -1.9%? That shows complacency. The market isn’t punishing weak performance like it used to. That usually doesn’t last long. When sentiment flips, those same stocks could crater.

👀 Bottom Line:

FactSet paints a cautiously optimistic picture. I’d paint it more like this:

“Growth is holding up, but fragility is rising. This market feels more like an expensive hope trade than a conviction rally.”

Use it to your advantage—hedge, rotate, or sell to the next optimist.

CONTRARIAN'S SUGGESTED GAME PLAN: Post-Q1 2025 Earnings

1. Fade the Rally, Don’t Fight It

• Context: High EPS beats, soft guidance, stretched valuations = complacency trap.

• Action:

  • Sell covered calls on names with high multiples + weak guidance (e.g. in Industrials or overhyped Consumer names).

  • Scale into long-dated put spreads on overextended mega-caps.

  • Use UPRO hedging strategy (like you’ve built) — max long, but volatility-hedged.

2. Smart Rotation: Follow Margins, Not Hype

• What FactSet didn’t say aloud: Profit margin pressure is real. Cost-cutting, not top-line growth, is driving some of the EPS beats.

• Action:

  • Underweight sectors like Industrials and Materials — earnings were weak and margins are eroding.

  • Overweight lean-margin expanders: select Healthcare, semiconductors, and enterprise software (with pricing power).

  • Look for companies with high FCF/EV, regardless of sector.

3. Exploit Guidance Disconnect

• Game: Negative guidance is not being punished enough — a short window exists.

• Action:

  • Identify stocks with recent weak guidance but no real price drop.

  • Use short-term put calendars or bear call spreads.

  • Monitor those names into their next event (earnings, Fed signals, sector rotations).

4. Earnings Drift Is Your Friend

• FactSet data: Positive EPS surprise → avg +2.4% price move.

• Action: Buy post-earnings drift trades on strong beaters (especially if they raised guidance) and use tight trailing stops.

• Names that crushed earnings and raised guidance may still run another 5–10% in 2–3 weeks.

5. Front-run the unwind of “valuation elasticity”

• Translation: The higher the multiple, the faster the fall when reality hits.

• Action:

  • Screen for S&P 500 names with forward P/E >25 + YoY guidance cut.

  • Build a “balloon pop” basket of 5–10 of these.

  • Execute a cash-neutral long vol/short equity combo (e.g., long VIXY calls, short equity puts).

Mental Framework:

"The market is acting like we’re in 2017, but macro feels more like 2007 lite."

You’re not betting on a collapse — you're harvesting delusion premiums before they evaporate.

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