Much stronger than expected earnings reports from US companies in recent weeks, Wall Street’s already high forecasts for second-quarter earnings growth have risen from last year.
Earnings are expected to have risen about 90% in the second quarter from analysts’ forecasts of 65.4% in early July, according to IBES data from Refinitiv, with results so far from about 300 of the S&P 500 companies in Monday morning.
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Nearly 89 percent of reports exceed analysts’ estimates for second-quarter earnings – the highest figure recorded, according to Refinitiv data dating back to 1994.
The second quarter of the gang year is expected to mark the peak of the recent rise in US profits as companies recover from the depths of the downturn caused by last year’s pandemic.
“Except for a few disappointments here and there, everyone was making steady profits. It was a great win season, but it’s supposed to be,” said Jake Dollarhide, chief executive of Longbow Asset Management in Tulsa, Oklahoma.
“It will be interesting when you start delving deeper into the third and fourth quarters. The market can expect a little journey.”
The profits of the third quarter are estimated to increase by 29.6% compared to the previous quarter. Fourth quarter earnings increased by 21.2%, based on Refinitiv data.
Overall, companies reported earnings of 16.6% above expectations, compared with an average of 20.1% for the previous four quarters and an average of 3.9% in 1994, based on Refinitiv data.
The companies that contributed the most to the big profits of the profit growth are Apple, Wells Fargo, Exxon Mobil and JPMorgan Chase. Financial companies are half of the top 10 growth rates so far this season, according to Refinitiv.
“Surprises were positive, large-scale in sectors and industries,” but “results” were mixed, UBS strategists including Keith Parker wrote in a note Monday.
The S&P 500 has been almost stable since the unofficial start of the earnings season on July 13. Among the companies left to report for the quarter are many of the major U.S. retailers, including Walmart.