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Why is the Market Unimpressed with Strong Earnings Results?

It is not correct to claim that the market has entirely ignored strong Q2 results from all the companies, but we can say that about a number of bellwether companies, particularly the banks. The market sees banks in general and the big banks in particular as plays on the interest rate outlook and as long-term treasury yields have come down lately, these stocks have lost some of their earlier mojo as well.

Beyond this macro development that has bearing on these stocks, all of these banks reported numbers that were up significantly from the year-earlier level, but showed notable areas of weakness as well, particularly in the core banking business. We saw this in the results from JPMorgan JPM, Bank of America BAC and all the others, but there are signs that consumers are starting to use their credits cards more. We saw evidence of increased credit card usage not only with the aforementioned large banks, but also in the reports from pure-play card operators like Discover Financial DFS and Synchrony SYF. It will be interesting to see if Capital One COF and American Express AXP will validate those same developments.

With respect to the Q2 earnings season scorecard, we now have results from 103 S&P 500 members or 20.6% of the index’s total membership. Total earnings for these 103 index members are up +117.6% from the same period last year +18.9% higher revenues, with 90.3% beating EPS estimates and 85.4% beating revenue estimates.

These results show a very strong momentum on the revenue front, both in terms of growth as well as the beats percentages, which if sustained through the remainder of the Q2 reporting cycle will be indicative of a still improving earnings outlook.

For more details about the Q2 earnings season and evolving expectations for the coming periods, please check out our weekly Earnings Trends report >>>>> All Around Earnings Strength

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Bank of America Corporation (BAC) : Free Stock Analysis Report
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Synchrony Financial (SYF) : Free Stock Analysis Report
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