Wall Street cheers for the peaking earning season

Moomoo News Global wrote a column · Jul 12, 2021 11:55

Another round of earnings season is coming this week. US conglomerates are expected to reveal the strongest ever rebound in revenue second-quarter earnings season, supported by the scale of the recovery in corporate America’s fortunes since the depths of 2020.

Source: Bloomberg

While earnings are expected to reach a peak in the second quarter, the above chart also illustrates how sharp they fell a year ago, when households and much of the economy were bruised badly by the global public health crisis.
More broadly, companies in the $S&P 500 Index (.SPX.US)$are expected to see a 63.6% increase in earnings in the second quarter from a year before, which would mark its highest 12-month climb since the fourth quarter of 2009, according to FactSet analysts.

Week Ahead Calendar

Source: moomoo

What’re the analysts’ opinions on this earning season?

What happens next week will color the entirety of earnings season. If we get some good ones, we'll be in party mode, but a negative series of numbers from the banks and some upsetting Covid stats could make for a tough earnings season.

-CNBC's Jim Crameron Friday looked ahead to the start of earnings season

Market participants are keenly aware that level of growth can occur only for a very short period of time. We do not think the markets are worried about economic or earnings growth slowing from these very robust levels, at least at this point

-Wells Fargo senior global market strategist Scott Wren wrote in a note

We believe EPS will grow 75% led by robust earnings for Financials and Cyclicals. Stocks have rallied with surging EPS expectations while multiples have been largely unchanged.

-Credit Suisse chief U.S. equity strategist Jonathan Golub on Bank industry

We’re a little more defensive. We would like to see the optimistic outcomes, but we think the risk profile in the world is rising.

-said David Kotok, chief investment officer at Cumberland.

I come back to inflation and margins being something that could really create a pause with stocks. Certainly if there’s wage inflation that starts to take hold, I think that is going to get people’s attention.

-said Larry Cordisco, co-lead portfolio manager of the Osterweis Growth & Income Fund

Since it is likely to be a record-setter for growth, it is critical that investors not lose sight of these significant fundamental developments.

-Joseph Amato, chief investment officer for equities at Neuberger Berman, wrote this week about the coming corporate reporting season

Valuations on their own don’t kill a market, but valuations make you vulnerable if there’s an unpleasant surprise. Should the momentum in earnings continue - and we think it will - we believe the market can remain resilient as policymakers adjust their thinking.

-said Tom Hancock, lead portfolio manager of the GMO Quality Fund

I think we’re at the peak for absolute levels of growth. I’m not saying it’s going to turn negative, but the idea that earnings are going to remain as big a support as they have over the past six months to a year (is dubious).

-Rupert Thompson, chief investment officer at Kingswood Group, sounded a note of caution.

Source: CNBC, Bloomberg, Dow Jones, Financial Times

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