The second-quarter earnings season is nearly half over. As of Friday, 44% of the companies in the S&P 500 reporting actual quarterly results with mixed success. Some 77% of the reporters have delivered better-than-expected earnings, while 61% have posted revenue beats, according to FactSet. That earnings-beat rate is above the five-year average of 72%.
Coming into the Q2 earnings season, there were concerns in the market about the impact of the stronger US dollar, slower global economic growth, and trade tensions on companies in the S&P 500 with higher international revenue exposure.
The Health Care (100%), Real Estate (86%), and Consumer Staples (85%) sectors have the highest percentages of companies reporting earnings above estimates, while the Utilities (67%) and Consumer Discretionary (67%) sectors have the lowest percentages of companies reporting earnings above estimates.
The positive EPS surprises are about in-line with historical trends while the proportion of these companies beating revenue estimates is notably on the weaker side. For the 220 index members that have reported results already, 78.2% are beating EPS estimates and 57.3% are beating revenue estimates. For the same cohort of companies, the proportion of positive EPS and revenue surprises was 78.2% and 57.3% in the Q1 earnings season.
However, the expectations for Q2 2019 were low with blended earnings decline of -2.6%, which was expected to mark the first time the index has reported two straight quarters of year-over-year declines in earnings since Q1 2016 and Q2 2016.
Last week was one of the busiest of the Q2 earnings season with 25% of S&P 500 companies reporting their financial statements. However, the new one will not be calm with almost 1,000 companies reporting results, including 163 S&P 500 members. News week’s reporting docket is comprised of a representative cross-section of the index, ranging from Apple and Spotify to General Electric and Exxon. By the end of next week, we will have seen Q2 results from 75% of S&P 500 members.
Facebook has met the expectations of analysts again
The US technology company Facebook Inc still adds new users and exceeds analysts’ sales forecasts for advertising, showing that the size and power of the social network so far have been impeded by new regulatory constraints and criticisms of its business model.
In its second-quarter financial report, the company also said that the Federal Trade Commission, which earlier on Wednesday announced the out-of-court settlement of an investigation into Facebook privacy practices, has opened a formal antitrust investigation into its activities. In June, the agency gained jurisdiction over the social network when the US government stepped up investigations over the largest technology companies.
Taking into account the costs set aside for tax-related agreements and fees, Facebook reported a net profit for the second quarter of 0.91 USD per share. Excluding positions, the company said the profit was 1.99 USD per share.
Facebook’s operating margin has fallen to 27% as costs have risen to 12.26 billion USD from 7.37 billion USD a year ago, mainly as a result of one-off effects. The company warned that it expects the cost to rise as a result of increased spending on content moderation and regulatory compliance.
Amazon failed to meet the quarterly earnings expectations
Amazon.com Inc failed to meet the quarterly earnings expectations for the first time in two years against forecasts of revenue decline in the current quarter and an increase in delivery costs.
In a report, the e-commerce giant also points out that its investment in faster deliveries has begun to pay off – revenue rose by 20% to 63.4 billion USD in the second quarter. This is above analyst expectations and more than the 17% reported in April for the first three months.
The Seattle-based retailer has been able to attract over 100 million paid subscribers to its Amazon Prime service thanks to its television and video content, Alexa Voice Assistant products, and faster delivery of goods, including food products from his entire chain Foods.
Now the company is investing primarily in halving delivery times for its paid customers in an attempt to keep its lead ahead of competitors like Walmart who have been able to deliver two-day deliveries without additional charges.
The company’s service costs slightly exceed 800 million USD.
Amazon’s profit rose to 2.6 billion USD in the quarter – less than 2.8 billion USD, which analysts expected. At the same time, operating costs increase by 21%.
The significant funds the company spends on shortening delivery times show that even the world’s largest online retailer is not immune to competition.
Alphabet Inc sales surpassed analysts’ expectations
The US technology company Alphabet Inc posted second-quarter earnings that surpassed Wall Street’s expectations, moving away from concerns about slowing growth.
The company’s sales for the April-June period, excluding payments to partners, amounted to 31.7 billion USD. The analysts expected an amount of 30.8 billion dollars.
Google’s parent company also announced a 25 billion USD redemption plan for its C-class shares, its biggest buyout so far. Alphabet’s cloud business is also growing seriously.
Ad sales rose by 16%.