Earnings (General News) 02 (Oct 16 - Dec 25)

[behappyalways]

$SPX earnings growth is projected to decelerate to 4% y/y in Q2
https://x.com/Mayhem4Markets/status/1942228715116663058

[behappyalways]

So far during Q2 earnings season, misses are being punished harshly. With drops that are nearly as steep as 2022.
https://x.com/Mayhem4Markets/status/1946559939725390182

[winston]

2Q Earnings

At this early stage, the second quarter earnings season for the S&P 500 is off to a strong start compared to expectations.

Both the percentage of S&P 500 companies reporting positive earnings surprises and the magnitude of earnings surprises are above their 10-year averages…

Overall, 12% of the companies in the S&P 500 have reported actual results for Q2 2025 to date.

Of these companies, 83% have reported actual EPS above estimates, which is above the 5-year average of 78% and above the 10-year average of 75%.

Now, it’s not all good news.

For example, in this afternoon’s Growth Investor Flash Alert, Louis said that the market is in search of leadership from a company that not only beats earnings but guides higher. And he’s not sure we’re going to get it this week.

From Louis:

Leadership remains elusive.

General Motors Company (GM) posted a solid beat, but shares fell after management failed to provide guidance and mentioned tariff-related headwinds.

Meanwhile, Lockheed Martin Corporation (LMT) disappointed on earnings, and that’s dragging down names in the defense sector.

Even high-flying names like Palantir Technologies Inc. (PLTR), which should benefit from reforms in the Department of Defense, were caught in the crossfire.

So, the market is meandering.

Part of the issue is that there’s a very high bar today due to valuations looking forward.

FactSet puts the S&P’s forward 12-month P/E ratio at 22.2. This is almost 12% more expensive than the 5-year average at 19.9 and nearly 21% pricier than the 10-year average of 18.4.

So, companies need to beat today – and these earnings forecasts need to come to pass tomorrow – or else investors will find themselves sitting on lofty stock prices unsupported by fundamentals…a great recipe for sharp pullbacks.

By the way, take a guess – what’s the worst sector offender from a valuation perspective? (As measured by the forward 12-month P/E ratio.)

Information Technology, clocking in at a forward P/E of 30.0.

(Consumer Discretionary isn’t far behind, with a forward P/E at 28.4.)

Source: Investor Place

[winston]

US Q2 Earnings

Q2 earnings season is almost done. We headed into it with the market looking for 4.9% earnings growth. We're coming out north of 11%.

What about margins, in a world spooked by tariffs?

Profit margins broadly expanded, across the majority of sectors, at 12.8%. That's better than last quarter, better than the year ago quarter, and better than the 5-year average.

Add to that, we have pro-growth tax and industrial policy. We have regulatory relief in the Treasury market. We have a resumption of the easing cycle coming in this second half of the year. And the infrastructure buildout to support the technology revolution is just getting underway.

Source: Barron's

[winston]

If the world is crumbling, why aren’t we seeing a reaction in the stock market?

by Luke Lango

Well… we actually are.

Take a look at the profit growth rates for the Magnificent 7 tech stocks (firmly in the AI Economy) and the S&P 493 (which comprises some AI Economy stocks, but also a lot of Everything Else Economy stocks)…

This quarter, the Mag 7 is expected to grow profits by 26%, versus just 2% growth for the S&P 493…

Inflation is currently running north of [3%], so the S&P 493 will essentially have NEGATIVE real profit growth for the rest of the year. Ouch!

So, how are we to navigate this?

To start, we should be invested in the strongest companies that are thriving in this environment.

Stick with what’s working. For example, the Xtrackers Artificial Intelligence and Big Data ETF (XAIX,) a proxy for the AI economy.

I recommended it in the Freeport Investor in December and it’s up 44% from its April lows. That’s a no brainer.

But don’t fall in love with the narrative.

Even strong stocks can get whacked in a real recession.

The best thing to do is keep a little extra cash on hand and hang on to your hedges in gold and Bitcoin.

Source: Hypergrowth Investing