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News & Views

Provided by the Investment Professionals of Frost Investment Advisors | July 26 , 2021

Q2 Earnings to Top Expectations and Suggest Wider Recovery

As we enter the heart of second quarter earnings season this week, results should suggest that a broader recovery is well underway. S&P 500 earnings have been strong so far, coming in 18% ahead of expectations as of last Wednesday’s close. Of the 60 companies that had reported, 88% surprised to the upside on earnings, while 82% beat on sales.

Earnings growth year-over-year has been stronger than most analysts expected. So far, reported earnings growth is at 117% year-over-year, well above index-wide expectations of 71%. This is much higher than the 53% anticipated at the start of 2021. Most of the earnings growth so far has come from financials, industrials, discretionary and technology.

This week is the biggest week for earnings for this quarter, with 50% of the SPX market cap expected to report. Although there will be a lot of focus on the FAANG stocks and other bellwether issues, earnings are expected to surprise on the upside across a broad range of sectors. This suggests that there is indeed a broad-based economic recovery underway that is likely to continue throughout the year.

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