Earnings remain the primary focus this week, with more than one-fifth of S&P 500 members coming out with quarterly results. The early going has been tough, with growth remaining challenged and fewer companies able to beat estimates, but we will have a much better view of the earnings picture after this week.
Including this morning’s reports from Morgan Stanley (MS), Hasbro (HAS) and others, we now have Q2 results from 65 S&P 500 members that combined account for 24.5% of the index’s total market capitalization. Total earnings for these 65 companies are up +2.9% on +0.5% higher revenues, with 71.2% beating EPS estimates and 40.9% coming ahead of top-line expectations.
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This is weak performance than we have seen from this same group of 65 S&P 500 members in other recent periods. Not only are the earnings and revenue growth rates below recent quarters, but fewer companies are coming out with positive surprises, particularly on the revenue side. With respect to revenue surprises, it is worth pointing out that while revenue beat ratios were tracking even below Q1’s extremely low levels earlier in the reporting cycle, they have improved somewhat in recent days.
The Finance sector, which has a relatively heavy weightage in the results thus far, have been better than expected. Looking at the aggregate results on an ex-Finance basis makes the results even weaker. With big players from a number of other sectors like Technology on deck to report results this week, we will have a good sense of the Q2 earnings trends over the coming days.
