HALF TIME: US earnings have passed the half-time hump, with Europe catching up fast. There has been more individual company drama than we would have liked, particularly with ‘big tech’ disappointments from Netflix (NFLX) and Amazon (AMZN), and even Teflon-coated Apple (AAPL) not immune from supply-chain problems. Nervousness is clear in the strong asymmetric reactions to misses (-3%) versus beats (+0.5%). But the overwhelming message has been one of resilient earnings growth, sustainable profit margins, and with the vast majority beating expectations. Earnings remain a key market anchor and offset to continued valuation pressures.
THE US: S&P 500 revenues have grown 12% vs last year and profits are up 9%, or double-digit except for AMZN, and lapping the 90% surge of last year. Four fifths of stocks, and all sectors, have beaten forecasts. Commodity sectors led the growth and been amongst the strongest ‘beats’ with big operating leverage to higher prices. Despite the strong USD and global uncertainties, international revenues have led domestic growth 2:1. Net profit margins are only slowly easing, to 12.2% from 12.4% last quarter, as companies are adept at offsetting the rising cost pressures.
EUROPE: Europe and UK companies are seeing stronger numbers than US, with revenues near 20% and 30% earnings. 60% stocks have beaten forecasts and variations are wide. ‘Beats’ were led by industrials and financials, and ‘misses’ real estate and discretionary. Europe’s globalized corporates face more cost pressures, with PPI running at over 30%, whilst less FX headwinds.
All data, figures & charts are valid as of 02/05/2022