We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
The overall picture emerging from the Q2 earnings season has turned out to be good enough; not great, but not bad either. Importantly, Q2 results and guidance for the current and coming periods have turned out to be better relative to pre-season fears.
Estimates for the last two quarters of this year and for next year have started coming down, even though positive revisions to the Energy sector continue to partly offset negative revisions elsewhere.
The +2.4% earnings growth expected for the S&P 500 index in 2022 Q3 is down from +7.2% at the start of the period. Excluding the Energy sector, Q3 earnings are expected to be down -4% at present, a significant decline from +2.1% in the beginning of July.
Looking at the calendar-year picture, total S&P 500 earnings are expected to be up +6.5% in 2022 and +7.3% in 2023. On an ex-Energy basis, total 2022 index earnings would be up +0.1% (instead of +6.5%, with Energy).
The overall corporate profitability picture emerging from the Q2 earnings season, with a little over 90% of S&P 500 results out, continues to show stability and resilience in key earnings drivers like consumer and business spending.
While this stability and resilience run contrary to worries of an imminent economic slowdown or even a recession, we are starting to see tell-tale signs of emerging weakness in both consumer and business spending. The Walmart (WMT - Free Report) pre-announcement is probably not solely due to weakness in lower-income households, but that consumer segment is nevertheless feeling the squeeze as we heard from companies in a variety of industries, including AT&T (T - Free Report) . Other households seem to be doing just fine, as we heard from banks, credit card operators and others.
With respect to business spending, we have started seeing a squeeze on advertising budgets and hiring plans, but Microsoft (MSFT - Free Report) and others didn’t see anything disconcerting with respect to spending on software and other services. That said, it is reasonable to expect some moderation in demand trends going forward as the full extent of the Fed’s tightening cycle permeates through the broader economy.
A slowdown has gotten underway, but there is nothing in the earnings data, management commentary and guidance that would suggest the U.S. economy heading into a major economic downturn.
That said, estimates have started coming down, with the overall revisions trend turning negative even after accounting for the persistent favorable revisions trend enjoyed by the Energy sector.
You can see this in the revisions trend to Q3 estimates in the chart below.
Image Source: Zacks Investment Research
If we look at the evolution of Q3 earnings growth expectations on an ex-Energy basis, the expected growth rate has dropped from +2.1% on July 6th to -4% today. The chart below shows the expected aggregate total earnings for full-year 2023 have evolved on an ex-Energy basis.
Image Source: Zacks Investment Research
As you can see above, aggregate S&P 500 earnings outside of the Energy sector have declined -3.3% since mid-April, with double-digit percentage declines in Retail (down -14.5%) and Construction (-11%), and high single-digit percentage declines for the Tech (-9.1%), Industrial Products (-8.7%) and Consumer Discretionary (-8.9%).
The Overall Earnings Picture
Beyond Q2, the growth picture is expected to modestly improve, as you can see in the chart below that provides a big-picture view of earnings on a quarterly basis.
Image Source: Zacks Investment Research
The chart below shows the overall earnings picture on an annual basis, with the growth momentum expected to continue.
Image Source: Zacks Investment Research
As strong as the full-year 2022 earnings growth picture is expected to be, it’s worth remembering that a big part of it is due to the unprecedented Energy sector momentum. Excluding the Energy sector, full-year 2022 earnings growth for the remainder of the index drops to only +0.1%.
There is a rising degree of uncertainty about the outlook, reflecting a lack of macroeconomic visibility in a backdrop of Fed monetary policy tightening. The evolving earnings revisions trend will reflect this macro backdrop.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
How Far Have Q3 Earnings Estimates Fallen?
Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
The overall corporate profitability picture emerging from the Q2 earnings season, with a little over 90% of S&P 500 results out, continues to show stability and resilience in key earnings drivers like consumer and business spending.
While this stability and resilience run contrary to worries of an imminent economic slowdown or even a recession, we are starting to see tell-tale signs of emerging weakness in both consumer and business spending. The Walmart (WMT - Free Report) pre-announcement is probably not solely due to weakness in lower-income households, but that consumer segment is nevertheless feeling the squeeze as we heard from companies in a variety of industries, including AT&T (T - Free Report) . Other households seem to be doing just fine, as we heard from banks, credit card operators and others.
With respect to business spending, we have started seeing a squeeze on advertising budgets and hiring plans, but Microsoft (MSFT - Free Report) and others didn’t see anything disconcerting with respect to spending on software and other services. That said, it is reasonable to expect some moderation in demand trends going forward as the full extent of the Fed’s tightening cycle permeates through the broader economy.
A slowdown has gotten underway, but there is nothing in the earnings data, management commentary and guidance that would suggest the U.S. economy heading into a major economic downturn.
That said, estimates have started coming down, with the overall revisions trend turning negative even after accounting for the persistent favorable revisions trend enjoyed by the Energy sector.
You can see this in the revisions trend to Q3 estimates in the chart below.
Image Source: Zacks Investment Research
If we look at the evolution of Q3 earnings growth expectations on an ex-Energy basis, the expected growth rate has dropped from +2.1% on July 6th to -4% today. The chart below shows the expected aggregate total earnings for full-year 2023 have evolved on an ex-Energy basis.
Image Source: Zacks Investment Research
As you can see above, aggregate S&P 500 earnings outside of the Energy sector have declined -3.3% since mid-April, with double-digit percentage declines in Retail (down -14.5%) and Construction (-11%), and high single-digit percentage declines for the Tech (-9.1%), Industrial Products (-8.7%) and Consumer Discretionary (-8.9%).
The Overall Earnings Picture
Beyond Q2, the growth picture is expected to modestly improve, as you can see in the chart below that provides a big-picture view of earnings on a quarterly basis.
Image Source: Zacks Investment Research
The chart below shows the overall earnings picture on an annual basis, with the growth momentum expected to continue.
Image Source: Zacks Investment Research
As strong as the full-year 2022 earnings growth picture is expected to be, it’s worth remembering that a big part of it is due to the unprecedented Energy sector momentum. Excluding the Energy sector, full-year 2022 earnings growth for the remainder of the index drops to only +0.1%.
There is a rising degree of uncertainty about the outlook, reflecting a lack of macroeconomic visibility in a backdrop of Fed monetary policy tightening. The evolving earnings revisions trend will reflect this macro backdrop.