EC These 3 Charts Clearly Tell The Q2 Earnings Season Story

Thursday’s blowout Q2 results from Apple (AAPL), Amazon (AMZN), Facebook (FB) and even Alphabet (GOOGL) reconfirm the enormous earnings power of these technology players. This is particularly notable in the current uncertain macroeconomic environment that has weighed heavily on the profitability of older blue chips like Exxon (XOM), Coke (KO), Boeing (BA) and others.

These impressive Tech sector results show that the market’s preference for these stocks has a fundamental basis. No doubt the aforementioned four Technology stocks, coupled with Microsoft (MSFT), now account for 22.5% of the S&P 500 index’s total market capitalization, second only to the Technology sector and bigger than the Finance sector.

The following three charts do a good job of showing the key trends that have unfolded this reporting cycle.

The takeaway from the first chart is that analysts were totally in the dark as they set their Q2 EPS and revenue estimates and ended up being conservative. As we all know, most companies withdrew previously issued guidance given how difficult it was to project business trends during the period because of the pandemic.

The chart shows the proportion of the 313 S&P 500 companies that have reported through Friday, July 31st, beating EPS and revenue estimates.

As you can see above, 56.9% of the S&P 500 members are beating both EPS and revenue estimates.

We knew that the pandemic dealt a severe blow to corporate profitability and the results of the 313 S&P 500 companies gives us a good idea of the magnitude of that growth hit. The second chart compares the year-over-year earnings and revenue growth for these 313 index members with what we had seen from the cohort of companies in other recent periods. Please note that when we say ‘earnings’, we mean aggregate net income, not mean or median EPS.

What this chart is showing is that total earnings (or aggregate net income) for the 313 S&P 500 members are down -36.2% on -7.8% lower revenues. To round out this scorecard, 79.9% of these 313 index members have beaten consensus EPS estimates and the corresponding revenue beats percentage is 65.2%, with a blended beats percentage of 56.9%.

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Moon Kil Woong 1 week ago Contributor's comment

I can't say the analysts expectations are that wrong. I think earnings will continue to deteriorate towards the analysts original expectations as time goes on. It is not the falloff the market worried most about, the uncertainty over how long it lasts is the critical factor. We need most to get the infected numbers down and treat it so it is less fatal for those who contract it to start. Time is the key factor.

The comment was deleted!

Craig Newman 1 week ago Member's comment

Good inisght.