The End of Peak Second Quarter Earnings Season Is Here – Stocks to Watch

The following research was conducted by Christine Short, Vice President of Research at Wall Street Horizon.

  • S&P 500 Q2 EPS growth expected to hit 6.7%, lowest level since Q4 2020
  • Some highly anticipated names were reported last week, with upbeat results from SBUX, ABNB, CAT and more
  • LERI says more companies are showing signs of uncertainty about future growth potential, now above Q1 2020 reading
  • This is the peak final week of the Q2 earnings season with 2,669 companies set to report
  • Potential surprises this week: TTWO, AKAM, SKT, H, SIX

After getting off to a somewhat rocky start with banks and big tech, second-quarter earnings started to pick up steam last week. The busiest week of the season did not disappoint, with many names in sectors such as healthcare, technology and consumer discretionary easily beating expectations. Those positive surprises were initially enough to convince investors to lift markets mid-week, but higher-than-expected jobless claims killed the rally on Thursday, with impressive non-farm payrolls able to bring markets back. Friday, ending the week practically flat.

Better-than-expected results led to a 0.7 percentage point increase in the annual growth rate of the S&P 500 EPS over the past week, which now stands at 6.7%. So far, 75% of companies exceed estimates, which is still below the 5-year average of 77%. The percentage by which companies exceed estimates also remains low at 3.4% compared to a 5-year average of 8.8%. Third-quarter earnings expectations are also trending lower, to 5.8% from 10.4% as of June 30. (Data from FactSet)

Despite improving financial results, LERI reading deteriorates

Despite better than expected earnings, LERI is still at its highest level in more than a year with a reading of 150, topping the first quarter 2020 reading of 147, reflecting the uncertainty of the first few weeks of the lockdown. coronavirus in the world.

The LERI (Late Earnings Report Index) tracks companies that confirm off-trend earnings dates. Academic research shows that a company reports earnings later in the quarter than it has in the past, this usually signals bad news to come on the conference call, and the reverse is true, a early earnings date suggests good news will be shared. The idea is that you’d rather delay bad news, but when you have good news, you want to share it.

A LERI reading above 100 indicates that more companies are delaying reporting and should be watched carefully. Although the LERI reading of 150 is the highest we’ve seen since the fourth quarter of 2020, it’s still nowhere near as high as what we’ve seen in the last three quarters of this year amid the pandemic. of COVID-19 and lockdowns. These quarters recorded LERI readings of 1380, 656 and 309, respectively. Either way, a gradual rise this quarter continues to suggest that US companies are feeling uncertain about their future growth potential. In terms of raw numbers, 48 ​​companies confirmed earlier second-quarter earnings dates, while 72 confirmed later-than-normal earnings dates.

Preparing for the last peak week of the Q2 earnings season and the Retail Parade

This week marks the last for the peak earnings season, with 2,669 companies (in our universe of 10,000 publicly traded names) set to report. The sectors targeted will be industrials, healthcare and consumer discretionary.

major stocks reporting profits this week on August 8

Potential surprises this week

This week, we get results from a number of major companies on major indices that have pushed back their second-quarter earnings dates beyond their historical norms. Nine S&P 500 companies have confirmed outlier earnings dates for this week, all of which are later than usual and therefore have negative DateBreaks* factors. These nine names are American International Group, Inc. (AIG), Dominion Energy (D), Take-Two Interactive Software (TTWO), ONEOK, Inc (OKE), Principal Financial Group (PFG), Emerson Electric (EMR), Akamai Technologies (AKAM), ResMed (RSD) and Cardinal Health (CAH). Other notable names such as Hyatt Hotels (H), Six Flags (SIX) and Tanger Factory Outlet Centers (SKT) have also confirmed later than usual dates.

Importantly, Spirit Airlines also has an off-trend earnings date ahead of its report. The confirmed report date of August 9 is more than a week later than the estimated report date of July 27, but this is likely due to the upcoming merger with Jetblue. Mergers and acquisitions activity often results in changes to quarterly earnings dates. JetBlue also confirmed a later than usual date in last week’s report. The company ended up missing estimates on the high and low.

Take-Two Interactive (TTWO)

  • Date of company-confirmed report: Monday, August 8, AMC
  • Expected report date (based on historical data): Monday, August 1
  • DateBreaks Factor: -3*

TTWO typically releases its fiscal first quarter results on the first Monday in August. On July 11, the software company confirmed that it would instead release first quarter 2023 results on the second Monday of the month. Their report comes on the heels of peers Electronic Arts and Activision Blizzard, both beating revenue estimates, but EA only matched EPS’ estimates. Both names showed year-over-year declines in net income.

wave of profits

This is the last week of the peak Q2 earnings season with 2,669 companies expected to report. Around 80% of companies have confirmed at this stage (out of our universe of 10,000 global names), with 51% of those names having already declared.

q2 week revenue reports north america vs world chart image

For more information on the data from this report, please email: [email protected]

Wall Street Horizon provides traders and institutional investors with the most accurate and comprehensive forward-looking event data. Covering 9,000 businesses globally, we offer over 40 types of corporate events via a range of delivery options from machine-readable files to API solutions to streaming streams. By keeping clients informed of critical market-influencing events and event revisions, our data enables finance professionals to take advantage of or avoid the volatility that ensues.

christine shorts - horizon wall street

Christine Short, vice president of research at Wall Street Horizon, focuses on publishing research on Wall Street Horizon’s event data covering 9,000 global stocks in the market. Over the past 15 years in the financial data industry, his research has been featured widely in the financial media, including regular appearances on networks such as CNBC and Fox to talk about corporate earnings and the economy.

Twitter: @ChristineLShort

The author may hold positions in the mentioned titles. Any opinions expressed herein are solely those of the author and in no way represent the views or opinions of any other person or entity..

Carol N. Valencia