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Earnings Season!

Well folks, now we’re heading into the thick of 2022’s Q2 reporting period and with analysts having rapidly adjusted estimates downwards over the last couple of weeks, this could definitely get gnarly! As such, we have included an overview of what consensus expectations are for this reporting period and where the market may see some possible surprises.

 

“In the short run, the market is a voting machine. In the long run, it is a weighing machine.”

- Benjamin Graham

 

Market Talk

Headed into today’s session, the futures market has appreciated 1% across the board for major US indices on news that both of the BB banks reporting this morning: BofA and Goldman Sachs, have beat consensus estimates.

Factset has aggregated some key earnings figures to make note of heading into the week:

Earnings Scorecard: For Q2 2022 (with 7% S&P 500 companies reporting actual results), 60% of S&P 500 companies have reported a positive EPS surprise and 60% of S&P 500 companies have reported a positive revenue surprise.

Earnings Growth: For Q2 2022, the blended earnings growth rate for the S&P 500 is 4.2%. If 4.2% is the actual growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since Q4 2020 (4.0%).

Earnings Revisions: On June 30, the estimated earnings growth rate for Q2 2022 was 4.0%. Only two sectors are reporting higher earnings today (compared to June 30) due to upward revisions to EPS estimates and positive EPS surprises.

Earnings Guidance: For Q3 2022, 3 S&P 500 companies have issued negative EPS guidance and 1 S&P 500 company has issued positive EPS guidance.

Valuation: The forward 12-month P/E ratio for the S&P 500 is 15.8. This P/E ratio is below the 5-year average (18.6) and below the 10-year average (17.0).

 

Long: Guaranty Bancshares, Inc (GNTY-NASDAQ) | Timeline: 4-5 days

Guaranty Bank, which provides a range of commercial and consumer banking products and services for small- and medium-sized businesses, professionals, and individuals has reported earnings this morning, and what a surprise. After a very doubtful earnings season for banks, GNTY has announced earnings of $1.07 and revenue of $32.9 million, beating analyst expectations by 38.96% and 3.79%, respectively. Not only will the entirety of the banking sector encourage GNTY to also bounce back, but the announcement of their share repurchase plan will also help throttle the stock forward as investors continue to seek value in this rocky market. Considering the technicals, bulls have held up as this stock has mostly been trending within this symmetrical triangle - a widely used continuation pattern that features two converging trend lines with a similar slope before the price is forced to breakout and continue its established trend. That being said, the MACD is looking upwards after bouncing off zero, and with great news, GNTY is poised for an upwards break out into a new price channel in the $40 to $45 range.

 

DXY Strengthening Amid Global Declines

The US Dollar Index, or DXY, is an index that tracks the value of the dollar in relation to a basket of six currencies, those currencies being the Euro, Canadian Dollar, Swiss Franc, British Pound, Japanese Yen, and Swedish Krona.

 

Chart of the Day - The ‘Pancaking’ of the 3M to 10Yr UST Spread

James Bianco claims that “The 3m-10y curve is what economists look at when gauging a recession. It is PANCAKING! If the Fed hikes 75 in July, and 75 again is September, it should be inverted in two months, if not earlier.”




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