Stock Market & Economy Recap - Saturday, July 24

S&P 500 Earnings Update

S&P 500 earnings per share (EPS) increased to $201.27 this week. The forward EPS is now at +26.5% year-to-date. Approximately 25% of the S&P 500 has reported Q2 earnings so far. 88% have beaten earnings estimates, and results have come in a combined +17.3% above expectations. Q2 2021 earnings growth is now +78.1%.

The S&P 500 increased +1.96% this week, for another record.

The S&P 500 price to earnings (PE) ratio is now at 21.9.

The S&P 500 earnings yield is now 4.56%, compared to the 10-year Treasury bond rate – which declined to 1.28% this week. Despite the record highs in the stock market, valuations (when adjusted for interest rates – equity risk premium) are more attractive than they were back in 2010 and 2018, when the S&P 500 was trading between 1300 and 3000.

Economic Data Review

The Conference Board’s Leading Economic Index (LEI) came in at 115.1 for June, a gain of +0.7% for the month, while May was revised slightly lower (from 114.5 to 114.3).

The LEI is now +12.8% higher than it was at this time last year. Although the growth is down slightly from last month, it is still well above average. Recession odds typically don’t increase until the LEI turns negative year-over-year. No danger of that, it seems.

Notable Earnings

Semiconductor manufacturer ASML Holdings (ASML) reported Q2-adjusted EPS of $2.97 -- which was in line with street expectations -- and a growth rate of +45%. Gross margins improved to 51% and operating margins improved to 31%. Operating income grew +50%, to $1.492 billion.

Q2 revenue reported to be about 3% below street expectations, and down 8% sequentially, but with a growth rate of +21% over Q2 2020 results.

Trailing twelve-month (TTM) revenues made another company record, for the ninth straight quarter.

ASML trailing twelve-month (TTM) net income continues to soar. Profit margins have climbed to a company record 29%.

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I/B/E/S data is from Refinitiv.

Disclaimer: None.

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