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Massive week for US corporate earnings: Has enough bad news been priced in?

Mon 18 Jul 22, 3:59pm (AEST)
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Key Points

  • JPMorgan and Citi were high-profile names that moved the US market last week
  • 28 out of the first 35 S&P 500 companies that have reported second quarter earnings, had their third quarter earnings downgraded by analysts
  • This is the highest number of downward estimate revisions since June 2020

The ‘price’ in price-to-earnings has tanked but now the ‘earnings’ will be put to the test as the US kicks off quarterly reporting season.

This week has a massive line up of companies that should give investors a good indication for how earnings have held up amid the threat of economic slowdown and rising cost inflation. 

US corporate earnings we’re watching this week:

  • Monday: Goldman Sachs, Bank of America

  • Tuesday: IBM, Johnson & Johnson, Hasbro

  • Wednesday: Netflix, Nasdaq

  • Thursday: Tesla, AT&T, American Airlines, Domino’s Pizza

  • Friday: Snapchat, Verizon, American Express, Twitter, Verizon 

Reporting season so far

JPMorgan and Citi were the two more high-profile names that reported second quarter earnings last week.

JPMorgan, the biggest US bank by assets, earnings’ fell short of expectations, down -3.5% to fresh 52-week lows on the day of the result.

Interestingly, Citi shares rallied 13.2% after beating analyst expectations. The result lifted banking stocks and helped rival JPMorgan recoup the losses its stock suffered post-earnings.

Citi profits declined -27% compared to a year ago, but came in well above expectations. Revenue rose a greater-than-expected 11% thanks to higher interest rates and strong performances from its trading division and institutional services business.

Food for thought

Only 7 out of the first 35 S&P 500 companies that have reported their second quarter earnings, had their third quarter earnings estimates raised afterwards, according to The Earnings Scout.

77% had their third quarter earnings estimates cut. The average cut was -3.04%, the worst estimate revisions since June 2020.

Interestingly, if you look at the YTD returns (right most column), the average stock has declined -19% this year. And more importantly, is this enough to price in the potential headwinds?

2022-07-18 15 27 08-Window
Source: The Earnings Scout

 

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Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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