Well folks, welcome to week 15 of the Coachman’s Report! As Q2 reporting continues multiple reports have surfaced wondering whether the developed nations of the west will be headed into even more dire straits with inflation reaching higher peaks. Read on for a review of the current earnings data available as well as our usual picks!
“In life and business, there are two cardinal sins. The first is to act precipitously without thought and the second is to not act at all.”
― Carl Icahn
The S&P 500 danced around the key 4000-point area of value all of last week with it closing at 3961 points on Friday, up almost 2% since Monday’s open. Futures this morning are all positive in the US with all major indices up around 40-60 bps - the VIX also decreased 4% last week to a 3-month-low of 23.03. Depending on today’s moves in the market, tomorrow’s recommendation may include a longing of volatility → There are many economic updates being released this week that could spike this, including tomorrow’s US housing sales update. Below are the major companies reporting earnings this week.
Further to earnings, here’s a quick update of the figures headed into this week: Earnings Scorecard: For Q2 2022 (with 21% S&P 500 companies reporting actual results), 68% of S&P 500 companies have reported a positive EPS surprise and 65% 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 4.8%. If 4.8% 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%. Four 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, 10 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 16.7. This P/E ratio is below the 5-year average (18.6) and below the 10-year average (17.0).
Long: United Parcel Service Inc. ($UPS-NYSE) | Timeline: 2-3 days
UPS is set to report earnings before market open tomorrow, and although the company’s bottom line was likely damaged by the substantial growth in gas prices throughout the second quarter, on a long-term basis this may just be a bump in the company’s road. Earnings from credit card issuers, such as American Express, show that spending is still quite strong in the US, even as many fear a recession on the horizon. For example, on Friday Amex reported $13.395Bn in earnings, representing a positive surprise of over 7%. Alongside Visa, who is expected to surpass the previous quarter’s expectations by roughly 2.4% when they report earnings tomorrow, painting a potentially positive picture for UPS. In addition to these cost increases, and bullish consumption estimates, throughout the quarter UPS, has scaled pricing in order to mitigate some of the added costs associated with gas, thus providing another layer of security to these earnings. Over the past 10 earnings reports, they’ve beaten the top line estimate nine times, as such the street is looking for a surprise on the upside. As a word of warning, this trade should be abandoned if revenues reported underwhelm the expected $24.65Bn amount.
Chart of the Day - Gas Prices Across the EU and US