Earnings Beat Rates Down This Season
Mon, Aug 12, 2019
The unofficial Q2 earnings reporting period comes to an end on Thursday when Wal Mart (WMT) releases its numbers. More than 2,000 companies have reported earnings since the season began in early July, and 57.2% of them have beaten consensus analyst EPS estimates. As shown in the chart below, this quarter’s earnings beat rate is down significantly from recent quarters where 60%+ was pretty much a guarantee. If the current reading holds through Thursday, it will be the lowest beat rate since the Q1 2014 reporting period (April and May 2014).
Below is a look at earnings beat rates by sector this season. Technology has the strongest beat rate at 66.1%, followed by Financials at 63.3%. Utilities and Energy have the weakest beat rates at 33.3% and 38.8%, respectively.
Below we show this season’s earnings beat rates by sector versus the sector’s historical earnings beat rate going back to 2001. All but two sectors have beat rates this season that are below their historical average. The Financial and Real Estate sectors are the only two that have seen stronger-than-normal beat rates. Start a two-week free trial to Bespoke Institutional to access our Trend Analyzer, Chart Scanner, Earnings Explorer and much more.
1. Microsoft, Apple, Amazon, Alphabet, and Facebook Make Up Half of Tech’s Market Cap.
In late 2018, shares of Silicon
Valley’s finest tanked some 16% in three months. Since then, Big Tech has been
busy climbing back near record highs. And, as The Economist points out,
listed tech firms now make up more than 25% of the value of U.S. stock
The last time tech was this
important was 2000, when the sector briefly made up one-third of the value of
all U.S.-listed equities. Back then, the concern was that tech firms were “too
flimsy” for their valuations. We all know how the dotcom bubble ended, but…
Today’s a different story—tech’s
big five (Microsoft, Apple, Amazon, Alphabet, and Facebook) account for 12% of
pre-tax profits among the U.S.’ non-finance firms, up from 4% in 2010.
Zoom out: Those big
five make up half the tech industry’s market value, meaning new worries
for the new millennium. Today, the concern is less
about financials and more about the idea that Big Tech has accumulated too much
— The trade war between the United States and China entered a more dangerous
phase on Monday, as Beijing allowed its currency to weaken, Chinese enterprises
stopped making new purchases of American farm goods and President Trump
indicated he would look for ways to retaliate.
escalation shook world markets on Monday, as nervous investors looked for safe
places to park their money. Wall Street suffered its worst day of the year,
with the S&P 500 closing down nearly 3 percent. Selling was especially
heavy in the trade-sensitive technology, consumer discretionary and industrial
sectors. Yields on United States Treasuries, which fall as prices rise, dropped
as investors sought safety in government-backed bonds. Benchmark indexes in
Asia and Europe also fell.
Sunday, the People’s Bank of China, the country’s central bank, allowed its
currency to weaken past the psychologically important point of 7 to the
American dollar for the first time in more than a decade. In an unusually blunt
statement, the bank blamed the currency fall on Mr. Trump’s “unilateralism and
trade protectionism measures and the imposition of increased tariffs on China.”
Mr. Trump’s decision to impose additional tariffs
on Chinese goods also prompted Chinese enterprises to halt purchases of
American agricultural goods, according to China’s state-run Xinhua News Agency,
which called the president’s proposed tariffs a “serious violation” of an agreement
reached in June with Chinese President Xi Jinping.