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Welcome to Q2 Earnings Season

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Tuesday, July 12, 2016

With the earnings beat from aluminum giant Alcoa (AA - Free Report) after the bell Monday afternoon, we have now entered into the ramp-up to a plethora of earnings reports that will turn into a deluge in a couple weeks. We start slowly, but with big companies — specifically some of the biggest banks on Wall Street: JPMorgan Chase (JPM - Free Report) , Citigroup (C - Free Report) and Wells Fargo (WFC - Free Report) reporting later in the week.

Ahead of the bell this morning, following Alcoa’s generally positive results yesterday, the U.S.’s largest fastener distributor Fastenal (FAST - Free Report) disappointed investors on a Q2 sales and earnings miss. The company — whose products appear across many industries, from transportation to chemicals to construction — saw lower margins in the quarter, which helped cause the earnings miss.

After the bell today we will hear from two more S&P 500 firms: rail major CSX Corp. (CSX - Free Report) and global fast food corporation Yum! Brands (YUM - Free Report) . Lower energy prices in the quarter may negatively affect CSX’s top line and the continuing sag in the Chinese economy may give Yum! some quarterly headwinds (the company owns KFC, which has a large presence in China), but surprises to the upside would of course be welcome.

With markets at or near all-time highs, a better-than-expected Q2 earnings season appears to be somewhat priced in already. As quarterly results in aggregate tend to perform 3-4% higher than pre-quarter estimates, this might stand to reason, especially with many economists looking for economic strength to build here in the second half of 2016. But with expectations for overall earnings results for the S&P 500 expected to be down roughly 6%, we look to continue the year-plus earnings recession.

We are up again in the pre-market, appearing to want to continue the post-Brexit bounce. Dow futures are up around 72 points, the Nasdaq almost 25 points higher and the S&P up nearly 12 points.

Mark Vickery
Senior Editor