In just over two weeks, the US second quarter earnings circus roars into town again, with the first quarter reports for the S&P 500 only having ended last week with the solid results from American supermarket giant, Kroger.
Based on forecasts, US investors have hauled back on their expectations for the current quarter and have been doing so for a while.
Factset, the US data group reckons analyst forecast for second quarter revenue growth have come back from an annual rate of 3.5% to an average now of 3.4%.
That’s despite the obvious rebound in the economy since the first quarter freeze.
As usual, the first cab off the rank will be Alcoa as usual on July 8, followed later that week by big several big banks.
The outlook is mixed – investors don’t know how the economy’s rebound from the first quarter winter freeze has made its way into new sales and earnings growth for American companies.
But before then there will be reports from a few companies with balance dates after March 31.
They include General Mills, the food group, Bed Bath and Beyond, Nike, Carnival Cruises and book seller, Barnes and Noble.
Thomson Reuters points out that more S&P 500 consumer discretionary companies (retailers and groups such as General Mills and Bed Bath and Beyond) have warned on their second quarters than any other sector, with 22 negative outlooks – including ones from Bed Bath and Beyond and Carnival.
There’s been no positive ones outlooks in this sector – which seems to confirm the mixed outlook for household consumption in the US at the moment, despite the recovering labour market.
Most analysts are forecasting higher results in for the second quarter for the simple reason that many lost earnings and sales growth because of the freeze.
But unknown negatives that could detract from the rebound include the sharp rise in energy costs because of the outbreak of tensions in Iraq.
Looking at the first quarter results, earnings growth of 3.4% (across the 500 companies in the index) was the weakest since the first quarter of 2012. Given the extent and severity of the winter freeze, that’s understandable.
But analysts say that still beat most forecasts from Wall Street.
More than 75% of the 500 companies reported results that either met forecasts, or topped them.
The best performances came from telecoms, consumer discretionary (but many retailers were weak, such as Walmart) and utilities (which benefited from the severe winter. They should see revenues and earnings growth fall away over the next couple of quarters).
According to Bank of America Merrill Lynch earnings from all 10 sectors in the S&P 500 topped forecasts, which many analysts didn’t believe would happen because of the severity of the winter weather.
As an early precursor to the current second quarter, some of the April and May balancing companies, such as Fed Ex, have revealed solid revenue and earnings growth.
Fed Ex balanced on May 31 (for its 4th quarter) so its results picked up the rebound in the economy from March onwards.
Fed Ex is and its huge logistics business across the US and into America, especially from Asia, is seen as important barometer of corporate and economic health in the US.
About the only negative will be the rise in oil prices which will push up jet fuel and diesel prices (that’s why investors have gone negative on many airlines and transport companies).
And Intel last week upgraded its second quarter outlook for revenues and gross profit margins – another bullish point picked up by analysts.
At the start of June telecom giant, AT&T lifted its revenue outlook for the rest of the year on the back of higher wireless sales.
