by AlexPitti
Estimates for Q2 EPS growth as of June 28th were -0.21%. Since firms usually beat estimates, it’s likely we will see growth. Even in the last recession more than half of companies beat estimates. We’re not suggesting earnings seasons in the last recession were good. They were bad because estimates cratered ahead of time.
So far in Q2, 20 S&P 500 firms have reported earnings. They are listed below.
While these 20 firms are not necessarily indicative of the results we will see from the rest of the companies, given the small sample size, they give us an early idea of whether there is a risk of earnings season being terrible. The point here is these first 20 firms don’t support the narrative that earnings season is going to be terrible. 17 of these firms beat EPS estimates.
As we mentioned, earnings estimates are what is important. They generally fall. It’s about how much they are falling (rate of change). The table shows the changes to each firm’s Q3 earnings estimate. This is better than looking at if the company beat or missed estimates. For example, Micron beat EPS estimates, but it’s Q3 estimates fell 22.03%, meaning these results weren’t good. The average estimate cut is 1.57% for those firms. We will be watching the change in Q3 EPS estimates to measure this earnings season instead of looking at absolute growth.
Worst Weakness Since Last Recession