EC Handicapping The Q3 Earnings Season

The overall earnings picture has been steadily improving over the last three months as big parts of the U.S. economy have started coming out of the pandemic-driven lockdown. The market will be looking for this improving earnings trend to accelerate in the Q3 earnings season.

The wide majority of companies have fiscal quarters that correspond with the calendar quarters, which is September 30th for Q3. These calendar-quarter companies will start reporting Q3 results after September 30th. Back in the day when Alcoa (AA - Free Report) was in all the major indexes, the aluminum producer was generally seen as kick-starting quarterly reporting cycles.

The rump Alcoa took following its split a few years back means it no longer has this distinction, with the big banks now kicking off the reporting cycle. We will see the same with the September-quarter earnings season when JPMorgan (JPM - Free Report) and Citigroup (C - Free Report) report quarterly results before the market’s open on October 13th.

Not all companies have fiscal quarters that correspond with the calendar quarters, with about two dozen S&P 500 members that have fiscal quarters that ended in August and 12 such companies, including Costco (COST - Free Report), Nike (NKE - Free Report), FedEx (FDX - Free Report) and others have reported their fiscal August-quarter results in recent days.

We and other data aggregators put the results from these 12 index members as part of the Q3 tally. And we have another 6 S&P 500 members on deck to report fiscal August-quarter results this week, including Pepsi (PEP - Free Report), Micron (MU - Free Report), and others. Looked at this way, the Q3 earnings season has gotten underway already from our standpoint.

The expectation is for total S&P 500 earnings to decline -23.1% from the same period last year -3.1% lower revenues. This would follow the -32.5% decline in Q2 when economic and business activities came to a halt as a result of the pandemic driven lockdowns.

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Moon Kil Woong 2 weeks ago Contributor's comment

With Covid numbers going up, I would not count on big upturns next quarter. We are still a ways from dealing with this in a manner we can say the outbreak is under control.