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Investing.com -- In its U.S. equity insights note Thursday, Barclays (LON:BARC) said first-quarter 2025 earnings were “good (in some aspects very good)” across the S&P 500, but warned the performance may mark the last strong carryover from 2024’s momentum as the U.S. economy confronts headwinds from slowing growth and potential tariffs.

According to Barclays, more than 92% of S&P 500 companies have reported results, with 80% beating consensus earnings estimates, above the long-term trend of 76%. 

The bank explained that the average earnings surprise came in at 8.2%, which was well above the historical 5.2% trend. Year-over-year earnings grew by 11.5%, while sales increased by 4.7%.

“EPS growth surpassing sales growth is driving positive operating leverage,” Barclays stated. 

However, the firm cautioned that despite the strength in headline numbers, survey-based data remains weak and forward guidance is softening. 

“Street FY25 is down ~4% YTD to $264, almost to our $262 estimate, with almost all sectors contributing,” they noted.

Barclays also observed that earnings beats did not meaningfully move stock prices, while misses did result in underperformance. 

“This suggests to us that the rebound has been largely beta-driven and is a result of improving overall sentiment rather than specific results/guidance,” the bank wrote.

Furthermore, Barclays says valuations have expanded sharply, with Big Tech once again trading at 27x forward earnings, other tech at 26x, and the rest of the S&P 500 near 20x.

While Big Tech remains resilient, the bank flagged consumer sector weakness and tariff risks. 

“Encouraging results from Big Tech helped to allay fears, but signs of stress are appearing in consumer results,” they wrote, pointing to negative year-over-year earnings for the broader consumer complex. 

With net margin guidance flat for the year, Barclays sees “concerns around negative operating leverage for the upcoming quarter.”

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