EPS Declines: A Closer Look

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EPS figures top expectations; Q3 still featured a massive loss

It’s the end of the summer, which signals the end of corporate earnings season. The quarter was stellar relative to analysts’ expectations with a beat rate above 80%, the best since data has been kept. In total, S&P 500 earnings verified about 22% above analysts’ forecast, according to FactSet data. Health Care and Information Technology were the primary sectors contributing to strong showing versus consensus. S&P 500 earnings for Q2 (reported during Q3) look to realize near $27, down about 34% from a year ago; it would be the worst quarterly loss since early 2009. FactSet notes that on June 30, 2020, the quarter’s forecast EPS fall was 44%; so the EPS picture gradually improved as earnings season progressed.

The second quarter of 2020 was undoubtedly the worst of the COVID-19-related economic devastation. All indications point to the mid-March to early April timeframe as being the worst of the recession – those few weeks may have been the entirety of the recession. For the April-June earnings season, a whopping 65% of North American index companies tracked by Wall Street Horizon endured earnings per share declines. Compare that to 58% during Q2 2019 and 47% two years ago. For earnings reported this quarter, Wall Street Horizon data indicates that 55% of North American firms had negative EPS – a giant increase from last year’s 33% and 2018’s 31%.

SourceWall Street Horizon