Peak Earnings Season Begins With 3 Big Tech Names Late to Confirm Their Report Date

Published: July 24, 2023

• S&P 500 EPS growth for Q2 2023 is set to come in at -9%, the lowest rate in 3 years and the third consecutive quarter of negative earnings growth

• The LERI shows corporate uncertainty remains at its highest level since the pandemic

• Potential surprises this week: Union Pacific

• Amazon is the latest big tech name to confirm their earnings date much later than usual

• Peak earnings season begins this week with big tech reports

As peak earnings season for the second quarter officially begins this week, investors are looking for some clear signs about the health of the US economy. While much of the data has pointed towards a strong and resilient economy, and the markets have certainly implied that as well, there are still some lingering concerns about potential risks in the second half of the year. With that said, many economists believe the probability of an all out recession is falling. According to a survey conducted by the Wall Street Journal, academic economists polled put the probability of a recession in the next year at 54% vs. the prior reading of 61%.

The S&P 500 and Nasdaq composite ended the week flat, while the DJIA eked up a little over 2% in response to a mixed start to earnings season. Goldman Sachs reported profits that tanked 60% YoY, and revenues that were down 8%. Other highly-anticipated names such as Tesla reported better-than-expected results on the top and bottom-line, but it was CEO Elon Musk’s comments about an expected slowdown in vehicle production due to factory shutdowns that had investors worried. TSLA stock fell over 10% for the week. Netflix reported robust profits and net subscriber additions that blew analyst expectations out of the water, but it was their missed revenue numbers that sent shares lower. 

The overall S&P 500 blended EPS growth rate fell precipitously to -9% from -7.2% the week prior. This could be the lowest growth rate since Q2 2020. Leading sectors this quarter include Consumer Discretionary and Communication Services while Materials and Energy are expected to be laggards.

LERI Stays High Even As Many Economists Drop Probability of Recession

The official pre-peak reading of the Late Earnings Report Index (LERI) showed that CEOs continue to be hesitant ahead of the second quarter earnings season, and while that number has slightly improved in the last week this sentiment still holds.

The Late Earnings Report Index tracks outlier earnings date changes among publicly traded companies with market capitalizations of $250M and higher. The LERI has a baseline reading of 100, anything above that indicates companies are feeling uncertain about their current and short-term prospects. A LERI reading under 100 suggests companies feel they have a pretty good crystal ball for the near-term.

The current peak season LERI reading stands at 124, one of the highest readings since the COVID-19 pandemic. As of July 21, there were 51 late outliers and 37 early outliers.

Source: Wall Street Horizon

Potential Earnings Surprises this Week - Union Pacific and Amazon

This week we get results from a number of large companies on major indexes that have pushed their Q2 2023 earnings dates outside of their historical norms. Six companies within the S&P 500 confirmed outlier earnings dates for this week, four of which are later than usual and therefore have negative DateBreaks Factors*. Those four names are Danaher Corp. (DHR), Nucor Corp. (NUE), Dover Corp. (DOV) and Union Pacific (UNP).  According to academic research, the later than usual earnings dates suggest these companies will report “bad news” on their upcoming calls. CenterPoint Energy (CNP) and Healthpeak Properties (PEAK) confirmed earlier than usual dates, suggesting they will report “good news” on their upcoming calls.  

Union Pacific (UNP)
Company Confirmed Report Date: Wednesday, July 26, BMO
Projected Report Date (based on historical data): Thursday, July 20, BMO
DateBreaks Factor: -2*

Union Pacific is set to report Q2 2023 results on Wednesday, July 26. This is a week later than expected, and their latest report date in 10 years, but it’s also the first time they haven’t reported on a Thursday. 

Academic research shows when a corporation reports earnings later than they have historically, it typically signals bad news to come on the conference call. This narrative could make sense for Union Pacific given some other reports in the freight and logistics world. The so-called “freight recession” has impacted a variety of names in the logistics, transportation, trucking and rail space. JB Hunt missed expectations when they reported last week due to softer freight trends and higher interest rates. It’s possible the same theme will be seen in UNP’s report on Wednesday. 

Late Confirmation Timing: Amazon

Amazon (AMZN)
Company Confirmed Report Date: Thursday, August 3, AMC
Projected Report Date (based on historical data): Thursday, July 27, AMC
DateBreaks Factor: -3*

Just as we reported last week, big tech continues to hold off on confirming their Q2 report dates. In addition to Alphabet and Meta who were late to confirm, we now see Amazon in the same boat. Historically Amazon has confirmed their Q2 earnings date around July 14, with a standard deviation of +/- 2.2 days. Amazon just confirmed their Q2 earnings date on July 20, 6 days past their mean confirmation day. 

Why is this important? Companies that tend to stall on confirming their earnings dates also tend to set later than usual earnings dates which academic research has shown highly correlates to bad news being shared on the call. The report date Amazon eventually confirmed, August 3, is indeed historically late for the retailer, and the first time they’ve pushed their Q2 report into August. 

While estimates for Amazon currently look strong and the recent Prime Day shopping event was touted as a success, actual results or their outlook could differ. Investors will want to keep a close eye on what is said in the report for clues as to how the US consumer is holding up as well as what we can expect for the back-to-school shopping season. 

On Deck This Week

This week marks the beginning of peak earnings season where we expect to see nearly 2,000 companies report. All eyes will be on big tech as we hear from Alphabet (GOOGL), Meta Platforms (META) and Microsoft (MSFT) this week. 

Source: Wall Street Horizon

Q2 2023 Earnings Wave

This season peak weeks will fall between July 24 - August 11, with each week expected to see nearly 2,000 reports or more. Currently August 3 is predicted to be the most active day with 1,028 companies anticipated to report. Thus far only 62% of companies have confirmed their earnings date (out of our universe of 9,500+ global names), so this is subject to change. The remaining dates are estimated based on historical reporting data.

Source: Wall Street Horizon

¹ https://www.wsj.com
² https://advantage.factset.com

* Wall Street Horizon DateBreaks Factor: statistical measurement of how an earnings date (confirmed or revised) compares to the reporting company's 5-year trend for the same quarter. Negative means the earnings date is confirmed to be later than historical average while Positive is earlier.