Corporate America’s initial stretch of earnings releases delivered results that surpassed the historical norm for the quarter’s kickoff, paving the way for a “solid” season, according to Bank of America Corp.
After last week’s announcements, 30 S&P 500 Index companies accounting for an 11% sliver of earnings have reported, the bank said in a note Monday. The group, highlighted by banking titans including JPMorgan Chase & Co., saw 77% of firms beating on earnings per share, according to BofA. While that’s down from last quarter’s 90% for the comparable span, it exceeds the historical level of 67%.
In BofA’s analysis, the early batch of results, while mixed, leave the quarter on track with where consensus expectations stood at the start of July, and with their strategists calling for “a solid 3% beat” on earnings. The bank said this month it expect a “trough” in profits in the second quarter.
“It’s hard to tell whether those handful of companies are indicative of how this earnings season will play out,” said Ohsung Kwon, an equity strategist at BofA. “But it’s a positive start.”
The pace of reporting is set to pick up. This week’s announcements account for 13% of the S&P 500 by earnings per share, covering a broader array of sectors, according to BofA. As the season goes on, investors are going to be scrutinizing themes like the influence of AI on Big Tech profits, and whether companies and consumers are still under pressure from inflation.
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S&P 500 firms are projected to post a quarterly drop in profits this period, likely the worst since 2020, although that’s expected to improve in coming quarters, data compiled by Bloomberg Intelligence show.
If not for energy, the earnings picture would be rosier this quarter, according to BofA. Strike that sector from the picture and S&P 500 companies’ projected year-over-year decline in earnings comes to just under 1%, compared with 7.1% when including the industry. And sales go from a 0.4% dip to a 3% bump without the sector.
Oil prices sank for the second straight quarter in the April-June period amid worries over a potential global economic slowdown.
As Kwon sees it, investors should keep the earliest announcements in mind as they prepare for the period to heat up.
“Early reporters typically point to, at least directionally, where earnings could head to,” he said.
