Next month’s earnings should shed light as to whether a profits recession can be averted. Photograph: iStockThird-quarter earnings season begins next month and analysts are divided as to what’s in store.
The positive take is that recession talk is overstated. Ritholtz Wealth Management’s Michael Batnick notes 75 per cent of companies beat second-quarter estimates and profits grew 6.3 per cent. “This looks nothing like a recession,” says Batnick, “where the average decline in earnings is 21.3 per cent.”
However, there are clouds. FactSet data shows 240 companies cited recession in earnings conference calls – more than four times the five-year average and the highest number since 2010. Earnings estimates are also coming down. That’s normal before earnings season, but both FactSet and Credit Suisse note recent cuts are sharper than usual. Still, given stocks have already cratered, recent revisions are “a far cry from the punch in the gut many feared”, says SoFi’s Liz Young.