U.S. Markets closed
  • S&P 500

    4,395.64
    +41.45 (+0.95%)
     
  • Dow 30

    34,258.32
    +338.48 (+1.00%)
     
  • Nasdaq

    14,896.85
    +150.45 (+1.02%)
     
  • Russell 2000

    2,218.56
    +32.38 (+1.48%)
     
  • Gold

    1,768.40
    -9.80 (-0.55%)
     
  • Silver

    23.03
    +0.46 (+2.05%)
     
  • EUR/USD

    1.1696
    -0.0034 (-0.2924%)
     
  • 10-Yr Bond

    1.3360
    +0.0120 (+0.91%)
     
  • Vix

    20.87
    -3.49 (-14.33%)
     
  • GBP/USD

    1.3619
    -0.0045 (-0.3282%)
     
  • USD/JPY

    109.7800
    +0.5600 (+0.5127%)
     
  • BTC-USD

    42,032.97
    -807.43 (-1.88%)
     
  • CMC Crypto 200

    1,089.55
    +49.07 (+4.72%)
     
  • FTSE 100

    7,083.37
    +102.39 (+1.47%)
     
  • Nikkei 225

    29,639.40
    -200.31 (-0.67%)
     
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Second quarter earnings are all about 2019

·Anchor
·4 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Monday, July 26, 2021

The two-year path back to normal

Second quarter earnings season is in full swing. 

In the week ahead, heavy hitters like Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Facebook (FB) and Alphabet (GOOGL) will all report their results. And if the first few weeks of earnings are any indication, we know two themes will emerge: big beats and talk of 2019. 

As Yahoo Finance's Emily McCormick noted Sunday in her week-ahead preview, data from FactSet tells us estimates don't stand a chance. With 24% of the S&P 500 having reported results, 88% of companies have topped expectations on the bottom line, while 86% of reporters are beating on the top line. 

Regular readers of The Morning Brief may not find this to be a total surprise: for months now we've written about Wall Street's inability to keep up with expectations through the cycle. 

But as more companies report results and executives host conference calls with analysts, we've started to see companies across all kinds of industries refer back to 2019 to help investors and analysts make sense of what "normal" might look like, and how far from that baseline the world still remains. 

Last Tuesday, Netflix (NFLX) reported its latest quarterly results and spent considerable time in its shareholder letter talking about how they're seeing the last 24 months, with 2019 serving as an anchor to understanding what trend growth might be for the business. 

"For Q3’21, we forecast paid net additions of 3.5 million vs. 2.2 million in the prior year period," the company said. "If we achieve our forecast, we will have added more than 54 million paid net adds over the past 24 months, or 27 million on an annualized basis over that time period, which is consistent with our pre-COVID annual rate of net additions." 

Split the difference of the last two years, and Netflix is telling investors its chart of subscriber additions wouldn't look quite so strange. 

After a huge 2020, Netflix has had a slower 2021. Which is why company executives talked so much last week about viewing the two years as different sides of the same trend. (Source: Netflix)
After a huge 2020, Netflix has had a slower 2021. Which is why company executives talked so much last week about viewing the two years as different sides of the same trend. (Source: Netflix)

In the retail space last quarter, Crocs (CROX) on Thursday reported a blockbuster quarter, and on its earnings call the company referenced 2019 some 17 different times. And perhaps to emphasize how some pandemic trends haven't gone away, Crocs highlighted for investors that while digital sales were up 25% against last year in the second quarter, this category was up 99% against the same period two years ago. 

Domino's Pizza (DPZ) also made at least six references on its earnings call to 2019, with CEO Ritch Allison saying: "As we continue to experience COVID overlaps, we believe it will be instructive to continue to look at the cumulative stack of comparable U.S. same-store sales anchored back to 2019 as a pre-COVID baseline. At 19.6% for Q2, we saw a material sequential improvement of the 2-year stack when compared to the first quarter." 

Another way of outlining how you can strip out the pandemic's positive impact on the pizza business, and see Domino's is still growing nicely

And as we wrote in Friday's Morning Brief, Whirlpool (WHR) CEO Marc Bitzer told Yahoo Finance Live the "upside down" world of the appliance maker failing to keep up with demand isn't going away anytime soon.

If we wind back the clock one year, the buzziest phrase in the business world was that the pandemic was creating "a decade of change in one year." How much mileage you can still get from that take one year later will vary.

But we do know from this earnings period that executives think talking about this year's results, compared to last year, doesn't build a clean picture of what is and isn't happening in your business. For that, you need to look a little further back. 

By Myles Udland, reporter and anchor for Yahoo Finance Live. Follow him at @MylesUdland

Yahoo Finance Plus
Try Yahoo Finance Plus now.

Yahoo Finance Highlights

Retail investors bought the dip yet again

‘Tired’ San Francisco bars weigh COVID-19 vaccine proof as cases jump

Pay raises are making a comeback. Here's how to ask for one

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, YouTube, and reddit