Sign in Subscribe
Stock prices

US Corporate Earnings Bode Well for Investors After Turbulent Summer

Strategic Insights

— 1 min read

As the US corporate earnings season kicks into high gear, investors are pinning their hopes on positive news to counterbalance the jitters caused by worries over Greece, China, and the timing of interest rate hikes. Results from Alcoa and PepsiCo have already shown promising signs, with Alcoa's earnings edging up from a year ago and PepsiCo's earnings beating expectations due to higher sales from Frito-Lay. Analysts say that despite concerns over Greece and China, US stocks have a solid foundation for growth, with earnings expected to rise 3.8 percent excluding the energy sector, which has been hit hard by the 50% drop in oil prices.

Key Takeaways:

  • US stocks are expected to see a boost from positive corporate earnings, with companies like Alcoa and PepsiCo already showing promising results.
  • The energy sector is expected to slump 61% in the second quarter due to the oil price collapse, but excluding this sector, earnings for S&P 500 companies are forecast to rise 3.8%.
  • Companies that rely on consumer spending, such as Macy's and Amazon, are expected to see earnings grow 6.1% as hiring improves and wages rise.
  • Europe's economy was showing signs of strength before the Greek crisis, with a 0.4% growth rate in the first quarter, outpacing the US.
  • Analysts will be looking for clues on the impact of the Greek crisis on US multinational companies operating in Europe.

Statistics:

  • The S&P 500 index edged down 0.2% from April to June, the first losing quarter since December 2012.
  • The S&P 500's 2.4% gain so far this year is small compared to the same period in previous years, when the index surged 17.8% in July 2013 and climbed 6.5% in the same month last year.
  • Energy companies are expected to report a 61% slump in earnings in the second quarter due to the oil price collapse.
  • Earnings for the consumer discretionary sector, which includes companies like Macy's and Amazon, are expected to grow 6.1%.
  • Europe's economy grew 0.4% in the first quarter, its best performance since the second quarter of 2013.

Sources:

  • State Street Global Advisors
  • S&P Capital IQ
  • Wells Fargo Investment Institute
  • UBS
  • JPMorgan Chase
  • Johnson & Johnson
  • Standard & Poor's 500 index
  • US Bureau of Labor Statistics
  • European Central Bank

Read more