Corporate earnings reached a record in the first half of 2021, and analysts expect that the rest of the year will add up to yet another record-breaker.
Expectations are for the second half — which is typically bigger, thanks to back-to-school and holiday shopping — to produce the biggest profit for the year as well. But companies are starting to get nervous about the supply-chain issues that have popped up and could get in the way of continued earnings power.
Those issues could show up in many places, including lost revenue from the inability to obtain goods and services to sell to consumers or companies, but also in the costs that companies must bear. For instance, large retailers such as Walmart Inc. WMT, -0.09%, Target Corp. TGT, -0.08%, Home Depot Inc. HD, +0.79% and Costco Wholesale Corp. COST, -0.48% have taken to chartering their own ships to ensure supply, which will show up in their costs and could cut into profit.
Butters pointed out the still elevated P/E ratio is partly because investors expect companies to beat on earnings, as they have historically. During the past five years, actual earnings for the S&P 500 have outpaced expected earnings by 8.4% on average, leading the earnings growth rate to top the expected rate by an average of 7.2% throughout the earnings season.
The calls to put on your calendar The trucking industry has been on an extreme uptick as the goods coming into ports need to move across continents, but staffing issues have become a larger concern, as has the longevity of the increase.
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