Earnings (General News) 02 (Oct 16 - Dec 25)

[behappyalways]

Subpar Season...So Far
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[winston]

2Q Earnings

Deutsche Bank AG’s chief strategist Binky Chadha recently commented on this.

He said that on a year-on-year basis, S&P 500 earnings are on track to rise by a healthy 9.4% in total. But there are three unusually large influences that are impacting this number, providing a big boost to the headline earnings number.

From Chada:

…The massive increase in Energy earnings (+10.5 percentage point boost to S&P 500 growth); the return to profitability for the pandemic-impacted companies (+2pp); and the drag from banks provisioning for loan losses (-4pp).

Excluding the impact of these three items, underlying earnings growth for the rest of the S&P 500 is only at a modest 1.2% year-on-year.

By this comparison, when adjusting for seasonality, Binka says that Q2 earnings are (emphasis added):
…On track to fall sharply by -4.5% quarter-on-quarter, one of the steepest declines over the last decade, comparable to those seen in the early stages of the pandemic.

Source: Investor Place

[winston]

2Q Earnings

According to FactSet, we are now 87% of the way through Q2 earnings season and 75% of the companies have beat expectations.

Earnings grew close to 7% on the quarter, better than the 4% growth anticipated at the close of the quarter in June.

Margins have come in at 12.3%. That's higher than the five year average, and in line with Q1 (which was the fifth-highest profit margin for reported for S&P 500 stocks on record).

Source: Barron's

[behappyalways]

beating their (lowered) estimates


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[winston]

From FactSet:

Companies that have reported positive earnings surprises for Q2 2022 have seen an average price increase of 2.1% two days before the earnings release through two days after the earnings release.

This percentage increase is much larger than the 5-year average price increase of 0.8% during this same window for companies reporting positive earnings surprises.

[behappyalways]

The Strong Dollar Is A Risk To Corporate Profits
https://www.zerohedge.com/markets/stron ... te-profits

[winston]

US 3Q Earnings

About a fifth of the companies in the S&P 500 have reported on Q3 earnings thus far.

Over seventy-percent have beat earnings estimates and about seventy-percent have beat revenue estimates.

And despite the hot inflation, profit margins remain healthy at 12%. That's above the 5-year average.

Source: Forbes

[winston]

3Q Earnings

For Q3 2022 (with 20% of S&P 500 companies reporting actual results), 72% of S&P 500 companies have reported a positive EPS surprise and 70% of S&P 500 companies have reported a positive revenue surprise…

[This 72% figure] is below the 5-year average of 77% and below the 10-year average of 73%.

In aggregate, companies are reporting earnings that are 2.3% above estimates, which is below the 5-year average of 8.7% and below the 10-year average of 6.5%...

In terms of revenues, 70% of S&P 500 companies have reported actual revenues above estimates, which is above the 5- year average of 69% and above the 10-year average of 62%.

In aggregate, companies are reporting revenues that are 1.3% above the estimates, which is below the 5-year average of 1.9% but above the 10-year average of 1.2%.

Source: Investor Place

[behappyalways]

3Q Earnings Season Stats
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[winston]

Earnings contraction

A sweeping earnings contraction may be the next shoe to drop. The market has not seen a wave of downward revisions in its earnings estimates since the onset of the coronavirus pandemic.

In a Nov. 4 note, Goldman Sachs shrunk its earnings target for the S&P 500 for the rest of the year as well as through 2024. The bank now sees earnings for 2022 coming in at $224, down from $226. Furthermore, strategists at the firm revised their earnings expectations for 2023 down to $224 ($234 previously) and to $237 in 2024 (from $243).

If the U.S. were to fall into a recession, she would expect a 10% to 15% contraction in earnings. At the same time, she noted, earnings faltering would vary across sectors due to inflation.

“Goods inflation is likely to come down much more quickly and to a more manageable level than services inflation, which tends to be more sticky and includes things like rents, and businesses are also dealing with sticky wage inflation”.

“So the sectors that are goods intensive and can benefit from goods inflation coming down and commodity prices coming down are likely to do better and maybe don’t take as big of an earnings hit.”

Source: Yahoo Finance