The first quarter of 2025 opened with promise and closed with questions. Against a backdrop of volatile policy shifts, evolving inflation expectations, and mixed consumer sentiment, corporate earnings offered investors a fresh read on the real economy. Here’s how the numbers stacked up—and what they’re telling us about the road ahead.
Fundamentals diverged based on the market segment we reviewed in the first quarter, with larger firms reporting a strong uptick in quarter over quarter growth while smaller capitalization companies showed more mute performance. The FactSet U.S. Equity Index had 3211 companies report as of May 27th, with net sales growth of 10% and EPS growth of 5%. At a sector level, Healthcare showed the best performance fundamentally in the quarter while energy faced a challenging environment.
Looking at the rest of the world, there has been a clear uptick in company performance. The FactSet World Ex-U.S. index had 15,669 firms report as of May 27th, with net sales growth of 1% and EPS growth of 24%.
At a sector level, technology and consumer services led the pack in fundamental performance. The technology component is particularly interesting as U.S. technology had been nearly unstoppable leading up to 2025. However, international technology names are showing a focus on monetization and that is coming through in this quarter’s performance.
World Markets 2025
We are pleased with the fundamental performance of our investments in the Matco Global Equity fund. Several investments showed strong results. Here are three examples:
- Monolithic Power Systems, Inc. reporting net sales growth of 39% and EPS growth of 47%
- Mastercard, Inc., reporting net sales growth of 14% and EPS growth of 11%
- Cencora, Inc. reporting net sales growth of 10% and EPS growth of 76%
The uncertain future environment for companies to operate in was a common theme in the investor calls that we participated in. The underlying ask from management teams was straight forward – pick a course for trade policy, ideally one that leans towards free trade. Strong fundamental performance in the first quarter supports our conviction in the companies that we own, and these savvy management teams have continued to invest in their operations despite the future uncertainty. As we have mentioned in past newsletters, we will continue to look at market volatility as a potential source of opportunity.