Earnings Season Highlights – Q2, 2017

With Earnings Season winding down, it has been an interesting quarter. The economy is continuing to grow, and earnings have mirrored that by growing approximately 10% in Q2 year over year. This is a solid but not spectacular quarter. 

Most of this data for this post comes from Factset, here is the link to their fine market summary by John Butters.

But here are some quick takeaways:

73% of companies had a positive earnings surprise. 10% had a negative surprise. These are generally positive results – the rough rule of thumb is that you have three positive earnings surprise to every negative surprise. So definitely, this quarter was very strong in this regard.

Coming out of Earnings, 59 companies issued negative forward guidance (i.e. they brought their own estimates down of company performance) vs. 35 issuing positive guidance. This is not a good sign – usually this is closer to even.

Here is the big one! For companies that beat earnings (i.e. had a positive earnings surprise) they had a price impact of -.3%. That is a staggering number. Usually markets reward a positive earnings surprise, with a very nice price move, but this quarter did not follow suit. There are a couple of reasons for this, but that will be the subject of my next blog post – stay tuned!

Finally, the big winners this quarter for earnings surprises were the Utilities and Financial sectors. They both performed very well this quarter, and the economy looks to be setting them up for continued growth. Financials are benefitting from rising interest rates, and utilities continue to benefit from cheaper fuel input cost.

So this was an interesting quarter, and as we watch analysts adjust their estimates for next quarter, keep an eye out for whether earnings can continue to grow at 10%.