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With Nearly 90% Reported, 2Q Earnings & Revenue Growth Stellar

by Fortem Financial August 9, 2021

With just shy of 90% of S&P 500 companies having reported earnings for the 2nd quarter, earnings growth is expected to be greater than 93%. In addition, revenue growth is estimated to be 23.5%. Both readings are well above the levels that were originally expected this reporting season. Last week also marked the second consecutive week both earnings and revenue growth expectations rose for every sector.

Quarterly Progression Showing A Weaker 3Q Than 2Q Now

While year-over-year earnings growth has been nothing short of remarkable, the quarterly progression of estimates shows that Q/Q growth is expected to be negative, which will be the first time since 2Q’20. The good news is the Q/Q growth rate is expected to flip back positive in 4Q.

2022 Earnings Turned Lower Last Week

2022 is becoming more and more important for the markets, and last week we noticed a blip to 2022 EPS. What had moved higher nearly $222 a share showed a revision lower back down to almost $219. With 2021 coming in significantly strong than originally expected, this matters for growth expectations next year. Currently, earnings are expected to be up just over 9% in 2022. However, if you begin to think about the potential for higher corporate tax rates, that earnings growth figure could be closer to 3%.

NTM Operating Margin Expands to 16.9%

It feels like a broken record talking about the record margin expansion we have seen since the depth of the pandemic, but it continues to push higher. The figure has expanded to 16.9%, almost one full percentage point greater than before the pandemic. However, over the last week, the pace of the rise appears to be slowing—an item we are watching closely.
Source: Strategas


Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments. Data provided by FactSet.

Sincerely,

Fortem Financial
(760) 206-8500
team@fortemfin.com

 

 

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