Strength in Q2 Earnings Buoys Market - Ahead of Wall Street

By Zacks | July 23, 2014 AAA

Wednesday, July 23, 2014

The barrage of Q2 earnings reports are keeping corporate earnings front and center, in a backdrop of disconcerting geopolitical headlines about cancelled civilian flights to Israel and downed military jets in Ukraine. Thankfully for the stock market, the Q2 earnings season has turned out to be fairly reassuring.

A few pockets of weakness aside, the overall picture emerging from this earnings season is one of strength and resilience. Earnings aren’t great, but they aren’t weak either. This is the takeaway from the reports thus far, including announcements from bellwether operators like Pepsi (PEP), Boeing (BA), Dow Chemical (DOW) and others on this morning’s super-buy earnings docket.

Including this morning’s reports, we now have Q2 results from 149 S&P 500 members that account for 43.9% of the index’s total market capitalization. Facebook (FB) is the key earnings report after the close today. 

Total earnings for these 149 companies are up +8.6% from the same period last year on +3.6% higher revenues, with 69.8% beating EPS estimates and 52.4% coming out with positive revenue surprises. This is better performance than we have seen at this stage in other recent reporting cycles.

The growth rates — for earnings as well as revenues — are better, and more companies are coming ahead of estimates. Notably, there is some modest improvement on the guidance front as well. The improvement isn’t so much in terms of companies starting to guide higher, but rather marginally fewer guiding lower and qualitatively offering a more reassuring business outlook.

Continuation of this trend through the rest of this earnings season will represent an improvement over what we have become accustomed to seeing in recent quarters, resulting in fewer negative revisions to forward estimates. We saw some of that in the run up to the start of the Q2 earnings season. But if current trends hold, we will see more confidence in second half estimates, which will be a material upgrade of the earnings picture.

Sheraz Mian
Director of Research

 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

comments powered by Disqus
Related Analysis
  1. Bull of the Day: YY Inc (YY) - Bull of the Day
    Stock Analysis

    Bull of the Day: YY Inc (YY) - Bull of the Day

  2. Jeff Bezos Versus Elon Musk: The Space Race, Amazon.com, Inc. & More
    Stock Analysis

    Jeff Bezos Versus Elon Musk: The Space Race, Amazon.com, Inc. & More

  3. Market Watchers Get a Breather - Ahead of Wall Street
    Stock Analysis

    Market Watchers Get a Breather - Ahead of Wall Street

  4. U.S. Restaurants Slog Through a Weak Industry - Industry Outlook
    Stock Analysis

    U.S. Restaurants Slog Through a Weak Industry - Industry Outlook

  5. This Once-Broken Social Media Stock Is Back On The Warpath
    Investing

    This Once-Broken Social Media Stock Is Back On The Warpath

Trading Center