Even though we've "unofficially" entered Q2 earnings season with Alcoa's (AA - Free Report) top-line beat reported after the bell Monday, we're ramping-up to the busy time like an avenue in Chicago. Aside from earnings reports from Yum! Brands (YUM - Free Report) , JPMorgan (JPM - Free Report) and Wells Fargo (WFC - Free Report) in the latter half of the week, there is but a small handful of companies posting quarterly results otherwise.
Things pick up next week with many financials following JPMorgan and Wells Fargo this week. And because the financial industry is expected to be the biggest performer in Q2, we'll likely get a fairly articulate view of how the second quarter is coming along within the next two weeks or so… just not right now.
That said, expectations for Q2 are almost laughably low at the moment. With forecasts having come down drastically in the past three months from around 3.6% to 0.4% now, the question is not whether or not the quarter will outperform expectations -- at least, we all should certainly hope it won't -- but by how much. The past two quarters, Q412 and Q113, posted actuals of 2+% -- a perfect definition of the "muddle-through" economy pretty much everyone agrees we're enduring. See here for the excellent synopsis by Zacks Director of Research Sheraz Mian:
Will Earnings Growth Bottom in Q2?
So with no particularly extreme headwinds over the past quarter, one might reasonably expect we will find ourselves back in the 2+% range once the dust settles on the quarter (and we can all go on vacation).
But even more interestingly, if you look at the graph in the link above, you'll see projected earnings literally skyrocket for Q3 and Q4 -- to 5.1% and 11.7%, respectively. And although these are year-over-year comparisons, they are anything but easy hurdles; the second half of 2012 was stronger than the first half, too. In fact, as Sheraz Mian points out, "[T]he level of total earnings expected in 2013 Q3 and Q4 represent new all-time high quarterly records."
Clearly, this puts a premium not directly on Q2 earnings (they're going to be pretty crappy) but on company guidance for Q3 and the fiscal year. We might expect things to ratchet down from 11.7% earnings in the fourth quarter -- 11.7%! -- but unless the earth crumbles beneath the feet of about every industry, we can feel secure things will be looking up in the second half. Certainly we should not ignore particularly bad guidance from anyone in the next few weeks, but barring any major catastrophe we should be enjoying new record highs in the next couple+ quarters.