A commentary on the earnings season

This is from Zacks, and is a tiny tiny snippet from a long comprehensive article, but you get the idea:


Earnings growth is on track to be below the prior quarter’s pace, but it will nevertheless be in double-digit territory for the second quarter in a row. Other notable aspects of this earnings season are the broad-based nature of the gains, the preponderance of positive surprises (particularly revenue surprises) and the overall number of Q2 earnings on track for new quarterly records. Even more significant than all of these factors is what is happening to Q3 estimates, which are not falling by as much as has historically been the case.

All of these factors add to the confidence that this momentum will continue in the current and following quarters.


Hi Saul,
IMHO, Zack’s article will correct IF things sail ahead under prevailing winds…

But could be significantly higher IF the president and congress sort out tax reform that leads to repatriation of corporate cash.

But could be significantly lower IF the North Korea situation escalates.

But could be significantly higher IF a major oil producer has production problems thereby increasing energy prices for the rest of the world.

But could be significantly lower if there continues to be political turmoil in D.C.

In the comfort of our cozy home offices, it is easy for me to forget that much of the energy producing world has their backs against a wall. In the past, when a geopolitical reared its ugly head the market would respond with a reasonably sharp downward drop then would gradually come back as the risk subsided. I have not seen that kind of market behavior for a while. My guess is by the year’s end we will. Might be a good time to have at least a little dry powder to take advantage of that.


PS I have also thought that there would be a sharp increase in interest rates for the past three years so my crystal ball isn’t the best.


The ‘positive revenue surprises’ shouldn’t really be a surprise seeing as the dollar has been depreciated in relative terms and most US firms in discussion receive revenue in foreign currency. Some of these positive revenue results will be undone in the near / medium term when higher interest rates underpin some strength in the USD

Saul and all,

This is the best source I’ve seen on earnings in general - facts, charts, insights, and very up-to-date.




This is the best source I’ve seen on earnings in general - facts, charts, insights, and very up-to-date.

Thanks Dan for the link. I’ve bookmarked it for future reference.

1 Like

There is one point worth making about the (apparently good) earnings scene, which is: how useful it would be if one of the well-known market data or credit rating firms created an S&P500 ‘quality of earnings ratio’ (‘the QER’). Perhaps it would become commonly quoted along with the earnings figure (or if several such companies did it, an average could be taken and it would become the AQER).

The figure would represent that % of the index’s overall earnings allowable under the terms of the ratio. It would be subjective, so there would be howls. It would aim to take account of too-expensive share buybacks, too-expensive acquisitions, trimming and cutting for one purpose only and all the other shenanigans which flatter earnings while devaluing a company.

Say the figure was 80%. By multiplying the market ‘earnings’ figure by 80%, you would get a more realistic figure. Time for another acronym: you could call it ‘AQER-adjusted S&P earnings’.

Or is this just non-GAAP earnings anyway? As I rarely look at earnings, I have never found out!