Q2 Earnings Preview: Easy YoY comparisons make US corporations appear better than they are


Key Takeaways:

  • Q2 2021 could see the highest earnings growth rate (64%) since Q4 2009, with upward momentum in estimates since the beginning of the year
  • 33% of companies (universe of 9,000+) have confirmed Q2 earnings dates, peak weeks will be July 26 - August 9. July 31 is a whopper!
  • Dividends picking up, conferences cooling down
  • Q2 earnings season officially kicks off next week with the big banks: WFC, C, BAC, JPM, GS, MS, Industrials: DAL, FAST and Consumer Staples; CAG, PEP

Easy YoY comparisons make Q2 2021 look better than it is

If you feel like you are experiencing deja vu at the start of this earnings season, you aren’t mistaken. In similar fashion to the Q1 season, we head into second quarter reports after hitting a fresh S&P 500 intraday high of 4,365.89 on Friday following a volatile week for markets. After reaching intraday records on the S&P 500 and Nasdaq on Wednesday, fears surrounding the spread of the COVID-19 Delta variant and its ability to hobble the economic comeback sent stocks into the red on Thursday, only to rally once again on Friday. Could a blow out earnings season push averages higher?

Early estimates from FactSet indicate this could be the best earnings season in over 11 years. Currently the expectation for Q2 2021 YoY EPS growth is 64%, which would be the highest rate since Q4 2009. Very similarly, Q2 2021 captures a period of recovery (reopenings, vaccination distributions, pent up consumer demand) vs. the prior year’s period which was almost entirely shut down due to COVID-19. Similarly, Q4 2009 reflected improvement over the prior year’s quarter which saw a massive downtick during the financial crisis led by the subprime mortgage debacle. In this regard, because Q2 2020 is an easy YoY comparison, it’s best to compare to years prior. For example, Q2 2021 growth is only 8.3% when compared to Q2 2019, which seems like a more realistic picture of the current rebound phase and growth trajectory we’re on. But don’t get me wrong, 8.3% is still a great growth rate in any quarter, well above the 5-year average earnings growth rate of 4.1%.

Earnings Confirmed for Q2:

As of July 7, 33% of companies have confirmed their earnings dates for Q2, out of our universe of 9,000+. This is also inline with approximately how many companies typically confirm by this time. So far only 18 S&P 500 names have reported.

Earnings Wave:

This season peak weeks will fall between July 26 - August 9, with July 31 predicted to be the most active day with 1,100 companies anticipated to report. Again, only 33% of companies have confirmed at this point, so this is subject to change. The remaining dates are estimated based on historical reporting data.

Other events to watch for this quarter


We’ve noticed the amount of confirmed events (virtual and in-person) for the third quarter is unusually low, about a third of what it usually is, even when compared to the year-ago quarter just after lockdowns were lifted and pandemic anxiety was still rampant. No theories on why this is the case yet, but we will be keeping an eye on this trend as it develops.


Firms around the globe continue to increase their dividends, and those increasing far outweighs those that are decreasing. Among the 9,000+ companies Wall Street Horizon covers across the globe, 2021-to-date has seen 2,231 firms raise dividends while just 711 have decreased dividends. Just another way companies are putting cash to work for the benefit of shareholders.

Earnings out this week:

This week there will be a concentration on Financials, both the big banks (WFC, GS, MS, BAC, C, JPM) and smaller financial institutions (BLK, PNC, BK, USB, STT, SCHW). Other sectors in focus this week will be Consumer Staples (PEP, CAG) and Industrials (DAL, FAST). Thursday is the heaviest day this week with 91 companies reporting.

Earnings Outliers

As always we’re keeping a close look at earnings date outliers, companies that are reporting earnings on a date outside of their historical range, which could provide a clue as to what the upcoming report and call will reveal.

We’ve got one outlier on our radar for this week.

Conagra Brands (CAG)
Company Confirmed Report Date: Tuesday, July 13, BMO
Projected Report Date (based on historical data): June 30, BMO
Z-Score: 7.54
DateBreaks Factor: -3

Conagra Brands is a “Peter Lynch” stock. The famed portfolio manager always said “buy what you know”—most consumers and investors know Conagra. The $17 billion market cap Consumer Staples stock headquartered in Chicago is a leading packaged food manufacturer. The firm boasts brands of Banquet, Chef Boyardee, Healthy Choice, Bird's Eye, and Duncan Hines. A much later than usual earnings date crossed our radar.

Conagra historically has reported their fiscal Q4 results between June 27 - 30, with no day of the week trend. As such, we set a report date of Wednesday, June 30. On June 8 the company issued a press release stating that FQ4 2021 results would be released on July 13 BMO, with the conference call at 9:30am ET. This change resulted in a high Z-score of 7.54. A high positive Z-score (we consider anything higher than 3 or lower than -3 to be significant) reflects a later than usual confirmed earnings date, which in this case could signal that CAG is getting ready to surprise to the downside. Z-score is also incorporated into our DateBreaks Factor*, for which CAG has a factor of -3, meaning there is a high negative deviation from the historical trend for the same quarter.

COVID’s Industry Impact

COVID-19 changed so many of our daily routines. Commuting to the office was replaced with stepping into the kitchen, sending the kids to the school bus was replaced with setting them up with a laptop in the living room, and dining out was replaced with grocery spending. While the world returns to normal, not everything is reverting to the mean.

Both online and in-store grocery consumption surged in Q2 2020, and Bank of America's internal card data shows that momentum for the category remains strong on a 2-year basis (+8.5%). Despite an uptick in dining out, we are still buying those brands we know best—many of them are Conagra’s.

Grocery Daily 2-Year Change of 7-Day Moving Average Spending (BofA Aggregated Card Data)

Staples Out of Favor

The Consumer Staples sector has not been the darling of Wall Street in 2021. It is the second-worst performing group among the 11 sectors with just a 5% total return YTD (as of July 7). That narrative is true for CAG as shown in the stock price chart below.

Defensive equities outperformed the S&P 500 during the COVID-crash in March 2020, but it has been a struggle for safety plays amid the risk-on environment in the last 16 months. While sales have been strong during and following the pandemic, traders are seeking a new catalyst amid new risks.

CAG Stock Price History (1-Year)

Inflation Watch

What could be driving investor pessimism of late? Inflation risks. Gauging inflation’s impact on a food company is tricky—it’s all about how well the firm can effectively pass along higher costs to consumers.

One measure CAG took earlier this year was to invest $15 million in its transportation operations to improve efficiencies. Portfolio managers holding CAG stock should pay close attention to what executives say regarding inflation on this week’s earnings call.

Earnings out this week:

Next week the earnings season continues to ramp up with 286 companies reporting worldwide, and 142 in North America.

The DateBreaks Factor is a Wall Street Horizon proprietary measure, using a modified z-score protocol which looks at standard deviations from the norm and that captures the extent to which a confirmed earnings date deviates or breaks from historical trend (last 5 years) for the same quarter.

Negative means the earnings date is confirmed to be later than historical average while Positive is earlier.