Wednesday, July 23, 2014
The barrage of Q2 earnings reports are keeping corporate earnings
front and center, in a backdrop of disconcerting geopolitical
headlines about cancelled civilian flights to Israel and downed
military jets in Ukraine. Thankfully for the stock market, the Q2
earnings season has turned out to be fairly reassuring.
A few pockets of weakness aside, the overall picture emerging from
this earnings season is one of strength and resilience. Earnings
aren't great, but they aren't weak either. This is the takeaway
from the reports thus far, including announcements from bellwether
) and others on this morning's super-buy earnings docket.
Including this morning's reports, we now have Q2 results from 149
S&P 500 members that account for 43.9% of the index's total
) is the key earnings report after the close today.
Total earnings for these 149 companies are up +8.6% from the same
period last year on +3.6% higher revenues, with 69.8% beating EPS
estimates and 52.4% coming out with positive revenue surprises.
This is better performance than we have seen at this stage in other
recent reporting cycles.
The growth rates - for earnings as well as revenues - are better,
and more companies are coming ahead of estimates. Notably, there is
some modest improvement on the guidance front as well. The
improvement isn't so much in terms of companies starting to guide
higher, but rather marginally fewer guiding lower and qualitatively
offering a more reassuring business outlook.
Continuation of this trend through the rest of this earnings season
will represent an improvement over what we have become accustomed
to seeing in recent quarters, resulting in fewer negative revisions
to forward estimates. We saw some of that in the run up to the
start of the Q2 earnings season. But if current trends hold, we
will see more confidence in second half estimates, which will be a
material upgrade of the earnings picture.
Director of Research
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