Earnings Season Insights: A Mixed Bag for Companies
Q2 Earnings Wrap-Up The second quarter earnings season is winding down, with about 86% of companies having already shared their financial results. A whopping 78% of these firms exceeded earnings per share (EPS) forecasts, averaging a 4% beat. This has pushed EPS growth to a solid +9% compared to last year, according to insights from JPMorgan.
Sector Performance: A Tale of Two Realities It’s interesting to note that not all sectors are thriving equally. While we see double-digit earnings growth in areas like Discretionary, Healthcare, Financials, and Utilities, the Materials and Staples sectors are either stagnant or even taking a dip. It’s like a wild rollercoaster ride on Wall Street!
Amazon’s Giant Leap Amazon has been a major driver of growth within the Discretionary sector. Without its impressive performance, the sector would have faced a discouraging -7% YoY EPS growth. Talk about being the lifeline for the retail scene!
Revenue Trends: The Ups and Downs On the revenue front, 47% of companies managed to outperform sales expectations, resulting in overall revenue growth of +5% YoY, which is just a smidge above the estimates. Yet, the Materials and Staples sectors are struggling with negative sales growth.
Defensive vs. Cyclical: A Shift in Earnings Most of the earnings growth is coming from Defensive sectors. For the first time since Q1 2022, Cyclical earnings have fallen behind Defensive earnings here in the U.S., marking a noteworthy shift, according to JPMorgan. It’s clear that this trend favors Defensive sectors, which have outperformed over the past three months.
The Magnificent 7: Not So Magnificent? In a surprising twist, while the Magnificent 7 stocks have seen an eye-catching +26% YoY EPS growth this quarter, they haven’t sparked much investor confidence. Apart from Meta, the others in this elite group have seen their stock prices slide an average of 8% just three days after reporting earnings. What’s up with that?
Profit Warnings Galore Unfortunately, many companies, especially in consumer-heavy industries like Autos and Luxury and even Industrials, are waving the profit warning flag. Folks in the know say weak end demand is a big reason for their disappointing projections.
Europe’s Earnings Landscape Over in Europe, 60% of the reported companies have topped EPS estimates. Overall, though, Q2 EPS growth sits at a modest +1% YoY, with a slight positive surprise of 3%. Cyclical sectors like Energy, Materials, and Industrials are bringing down the average performance, showing either flat or negative EPS results. Europe’s revenue growth stands at +2% YoY, bringing in some good vibes with a 2% positive surprise.
Japan Shines Bright In Japan, 60% of companies have exceeded EPS estimates, leading to an impressive +8% YoY EPS growth. Revenue has also been strong at +7% YoY, with about 58% of firms reporting sales that beat expectations. Seems like Japan’s got the winning formula this time!
