Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Peak Earnings Season Begins With EPS Growth Expectations At Lowest Since Q4 2020

By Christine ShortStock MarketsJul 25, 2022 02:43PM ET
www.investing.com/analysis/peak-earnings-season-begins-with-eps-growth-expectations-at-lowest-sinceq4-2022-200627604
Peak Earnings Season Begins With EPS Growth Expectations At Lowest Since Q4 2020
By Christine Short   |  Jul 25, 2022 02:43PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
  • S&P 500 EPS growth for Q2 is set to come in at 4.8%, the lowest level since Q4 2020
  • Some highly anticipated names reported last week, with big misses from the airlines, Twitter and Snapchat souring investors
  • The LERI points to more companies showing signs of uncertainty regarding future growth potential
  • Big tech in focus as peak earnings season kicks off: META, GOOGL, AMZN
  • Potential surprises this week: ETSY
  • Peak weeks for Q2 season from July 25 - August 12

Second quarter earnings season continued last week, and better-than-expected results from some big names such as Netflix (NASDAQ:NFLX) and Tesla (NASDAQ:TSLA) gave investors hope that the economy isn’t all that bad! That enthusiasm faded towards the end of the week when the airlines, Twitter (NYSE:TWTR), and Snap (NYSE:SNAP) disappointed. Historically speaking, results have been on par with longer term averages, but still showed a downward trend from the massive growth corporations saw in the last year and a half.  

The blended EPS growth rate for the S&P 500 did see a slight recovery however, increasing to 4.8%, after falling to 4.2% last week from 4.3% in the week prior. Note that the blended growth rate estimate at the beginning of the season almost always steadily increases as more reports come in. This is because a large majority of companies tend to surpass their expectations, the 5-year average beat rate for the S&P 500 is 77%. The beat rate this quarter is only 68%. The percentage by which companies are surpassing estimates is also much lower than what we’ve seen historically, 2.0% vs. the 5-year average of 8.8%. (Data from FactSet)

LERI Reading Worsens, Consistent with A Corporate America That Is Uncertain About Future Growth

We’ve been diligently tracking “corporate body language” for the last 15+ years, that is the non-verbal cues that publicly traded companies send to the market both intentionally and unintentionally. One tell a company can give regarding their financial health is the timing of their earnings release. Academic research shows when a corporation reports earnings later in the quarter than they have historically, it typically signals bad news to come on the conference call, and the reverse is true, an early earnings date suggests good news will be shared. The idea is that you’d prefer to delay bad news, but when you have good news you want to run out and share it. 

The LERI (Late Earnings Report Index) encapsulates this sentiment. It looks at the number of outlier earnings date confirmations and whether companies are confirming earnings dates that are later than they have historically reported, or earlier. A LERI reading over 100 indicates more companies are delaying reports, and is meant to be watched carefully. Thus far we see a LERI of 118 for the Q2 season, just lower than the 5-year average of 111, but notably higher than the last 5-quarter average of 77, suggesting the good times corporations enjoyed in the post-COVID bull market are slowly starting to fade. In terms of raw numbers, 41 companies have confirmed earlier Q2 earnings dates, while 52 have confirmed later than normal earnings dates.

Late Earnings Report Index
Late Earnings Report Index

Big Tech In Focus This First Peak Week Of The Season

Last week big tech names started to make a comeback as investors moved away from defensive names back into cyclicals. That momentum came to a halt after SnapChat and Twitter massively missed the mark Thursday after the close, both reporting results that were below top and bottom-line estimates. As a result the NASDAQ took a dive into the red on Friday, closing nearly 2% lower. 

Tech investors are hoping positive surprises from Meta Platforms (NASDAQ:META), Alphabet (NASDAQ:GOOG), and Amazon.com (NASDAQ:AMZN) will get the sector back on track this week. 

US/Canada Top Earnings This Week
US/Canada Top Earnings This Week

Potential Surprise: Etsy

  • Company Confirmed Report Date: Wednesday, July 27, AMC
  • Projected Report Date (based on historical data): Wednesday, August 3
  • DateBreaks Factor: 3* (highest reading)

Since IPOing in 2015, Etsy (NASDAQ:ETSY) has reported Q2 earnings results from August 1-6, with the most recent trend being the first Wednesday in August. On July 13 the company confirmed they would report on July 27, one week earlier than we had anticipated, and their first time reporting Q2 results in July, suggesting they have good news to share on the upcoming call.

After a pandemic lockdown pop for Etsy’s YoY EPS and revenue growth which saw both figures increasing by triple digits from Q2 2020-Q1 2021, fundamentals have come back down to earth. While Etsy benefits from a loyal and active customer base here in the US and the UK, and provides a curated customer experience that shoppers are looking for now, its recent marketing investments to acquire more buyers and keep the existing ones will likely continue to eat into the bottom-line. 

Earnings Wave

This season peak weeks will fall between July 25-August 12, with August 4 predicted to be the most active day with 1,079 companies anticipated to report. Roughly 59% of companies have confirmed at this point (out of our universe of 10,000 global names). The remaining dates are estimated based on historical reporting data.

Earnings Season US And Worldwide
Earnings Season US And Worldwide

 
Peak Earnings Season Begins With EPS Growth Expectations At Lowest Since Q4 2020
 

Related Articles

Peak Earnings Season Begins With EPS Growth Expectations At Lowest Since Q4 2020

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Art Carrano
Art Carrano Jul 25, 2022 3:22PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you for posting this article.
Art Carrano
Art Carrano Jul 25, 2022 2:47PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Typo in your headline.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email