EC Market Shrugs Off Strong Retail Earnings

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Earnings were hit hard by the Covid-19 pandemic, with each of the first three quarters of 2020 below the comparable quarters in 2019. The year-over-change was particularly dire in the June quarter when earnings for the S&P 500 index declined by almost a third from the year-earlier level.

The growth picture improved notably in 2020 Q3 when earnings declined by -7% and the expectation was that the last quarter of the year would show a comparable earnings decline. So, it’s a pleasant surprise that 2020 Q4 is on track to show +3.6% earnings growth when the pre-season expectation was for an -11% decline.

The chart below takes a big-picture view of quarterly earnings and revenue growth for the S&P 500 index that shows actual results for the last five quarters and current consensus estimates for the coming three periods, with 2020 Q4 highlighted in the middle.

The Q4 earnings season, which is now entering its final phase with just 18 S&P 500 companies still to report results, has been a very good one. Not only did an above-average proportion of companies beaten consensus estimates, but guidance has been positive as well. And it is this favorable guidance that has been helping push estimates for the current and coming quarters higher, as we will show a little later in this note.

Earnings Season Scorecard (as of Friday, February 26th)

We now have Q4 results from 482 S&P 500 members or 96.4% of the index’s total membership. This week brings in results from more than 300 companies in total, including 15 S&P 500 members. The traditional Retail space will dominate this week’s line-up, as it has been in recent days, with operators like Target (TGT - Free Report), Costco (COST - Free Report), Kohl’s (KSS - Free Report), Nordstrom (JWN - Free Report), Gap (GPS - Free Report), Kroger (KR - Free Report) and others coming out with quarterly results.

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Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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