The Latest Earnings Reporting Season Breakdown: No Sign of Recession
In the most recent earnings reporting season, more than 90% of companies have already disclosed their Q2 results, and the numbers are looking good. S&P 500 operating earnings per share (EPS) soared by 10.9% year over year to reach a historic high of $60.19.
Here’s a quick rundown of the key highlights:
1. Quarterly Earnings: Despite initial forecasts predicting a 9.1% increase in Q2 EPS, company managements’ negative guidance caused a drop in the Q3 EPS consensus to $61.77. However, the year-over-year growth forecast also decreased from 8.3% to 5.8%.
2. Annual Earnings: The annual consensus earnings estimates for 2024 and 2025 remained steady at $243.51 and $279.52 per share, respectively. The estimate for 2026 dipped slightly to $315.40, still showing a 13% increase from the previous year.
3. No Recession: Both the record-breaking Q2 earnings and analysts’ consensus estimates through 2026 indicate no signs of an impending recession. While industry analysts have a poor track record of predicting recessions, economists and strategists remain optimistic about the future.
4. Forward Earnings: S&P 500 forward EPS hit a new all-time high of $265.67, serving as a leading indicator for actual EPS and the overall economy. This metric is closely tied to the Index of Coincident Indicators and payroll employment, suggesting continued growth.
5. Revenues and Profit Margins: In Q2, S&P 500 revenues per share increased by 5.7% year over year. Profit margins also saw a rise to 12.3%, although still below the previous record of 13.7%. Looking ahead, the forward profit margin is expected to reach new highs, driven by a technology-led productivity growth boom.
In conclusion, the latest earnings data paints a positive picture for the economy, with no immediate recession in sight. Investors can take comfort in the strong performance of companies and the overall market outlook for the coming years.