Angela Weiss | AFP | Getty ImagesThe good news: in the second quarter, companies delivered surprisingly large earnings beats as analysts underestimated the strength of the recovery. That is happening again.
Not in the third quarter. Analysts started out assuming that the S&P 500 would see an earnings decline of 25% compared to the same period last year. But that was the bottom, and the estimates have been steadily improving since:Still, it's a pretty bad number. If the decline comes in at down 21%, "[I]t will mark the second largest year-over-year decline in earnings reported by the index since Q2 2009," according to John Butters, who tracks earnings for Factset.
"Analysts have not had the benefit of corporate guidance, and without that guidance they assumed the worst, and the worst has not come," Raich told me. There is still a problem providing longer-term guidance for many companies. More than 25% of the companies in the S&P 500 are still not providing any earnings guidance for 2020 or 2021, according to Factset."[I]t does appear that some S&P 500 companies have better visibility on future earnings heading into the third quarter earnings season than they did heading into the second quarter earnings season," Factset's Butters said in a recent note to clients.
Of course they will! If my old sales manager set my goals like Wall Street analysts set expectations, I would have blow away my quota every quarter.