US Earnings Season: Margin Squeeze

When are revenue results released?

  • Earnings or reporting season usually begins about a fortnight after the end of the quarter and lasts about six weeks. Most companies publish their results quarterly – starting in January, April, July and October. For example, the third quarter, third quarter, or September quarter earnings season is currently underway, with the earnings season starting in mid-October and ending in November. But some companies — especially U.S. retailers — often have fiscal quarters that are a month later, with the December quarter ending on January 31.
  • Companies have up to 45 days from the end of the quarter to file their latest financial information with the SEC. Companies in the same sector or industry typically report earnings in a cluster, with banks kicking off earnings announcements and retailers releasing their updates last. Unofficially, several major US banks, including Citigroup, JPMorgan Chase, Morgan Stanley and Wells Fargo, are starting earnings season alongside aluminum producer Alcoa.

Earnings season and investors

  • Many online stockbrokers, including CommSec, publish an earnings calendar that outlines specific dates when companies must release their results, allowing investors to prepare for the releases in advance.
  • Investors often use earnings updates to gauge both the company’s financial health and growth prospects. The results can provide some transparency to individual and professional investors, who both benefit from equal access to a company’s financial information at the same time. The investor can evaluate the performance of the company, the recommendations of analysts and the way the stock price is trading, which allows him to make informed decisions.
  • Investors often face heightened stock price volatility around a company’s earnings release. This is especially the case if a company’s results exceed or exceed market consensus estimates. The management team could also surprise with comments or news, which affects its operating performance and growth potential.
  • Overall, earnings season can affect market expectations and the future trajectory of the broader equity market. Financial services firms such as FactSet, Bloomberg and Refinitiv typically aggregate earnings estimates for benchmarks, such as the US S&P 500 Index, as companies report results. In response, professional investors such as analysts and portfolio managers may revise up or down their estimates or expectations for the level of the S&P 500 Index and key metrics, such as earnings growth per share. share (EPS).

Third Quarter 2022 Results: Key Themes

  • Heading into the third quarter 2022 earnings season, investors were obsessed with several key macro themes: soaring inflation, slowing consumer demand, high labor costs , the strength of the US dollar, commodity volatility and rising interest rates.
  • Persistently high inflation and the aggressive response of the US Federal Reserve, which raised rates quickly, combined to cloud the US economic outlook. The expected slowdown in 2023 is a blow to companies already struggling with growing pressures on margins and costs.
  • Corporate America has reported that profit margins are being squeezed by the strongest inflation in four decades. Sales growth remains above pre-pandemic levels, benefiting from higher prices. But sales or revenue estimates have come under pressure due to slowing consumer demand, inventory gluts, rising interest rates and rising recession risks.
  • Combined, these factors could further dampen future earnings, with net profit growth already slowing sharply. In this environment, a growing proportion of companies are lowering their capital expenditure forecasts as management becomes increasingly cautious about investing in plant, machinery and equipment as economic activity slows.

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