Q2 2022 Earnings Season Closes Out with Retail And Enterprise Tech

 | Aug 22, 2022 10:23AM ET

  • S&P 500 EPS growth for Q2 is unchanged from last week at 6.7%, the lowest level since Q4 2020
  • Retail reports last week showed a US consumer that was still strong in the second quarter, but that could be waning as we head into the second half of the year.
  • The LERI ends the season with the highest reading in a year-and-a-half, pointing to a general feeling of uncertainty amongst US corporations.
  • Q2 earnings season continues to wrap-up with final reports from retail and tech.

    • Last week we got some intel on the US consumer as retailers started reporting Q2 2022 earnings and July Retail Sales were published. While most of the news was positive, there were some hints of softening on the horizon. 

    Big box retailers such as Walmart (NYSE:WMT) and TJX companies (NYSE:TJX), as well as home improvement names like Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) all reported better-than-expected earnings last week, while TJX and LOW missed Wall Street’s revenue expectations. Target (NYSE:TGT) on the other hand garnered most of the attention when they missed bottom-line estimates by 50%, with sales in-line with sell-side expectations. The huge miss came as the retailer has struggled to unload excess inventory in categories that are now dealing with waning demand such as apparel and homewares. 

    And even as home improvement names were able to post decent results for the second quarter, the housing market showed signs of wear. July home sales fell nearly 6% MoM according to the National Association of Realtors, putting the US housing market in a recession according to the group. So far that hasn’t impacted forward estimates for HD and LOW which are still expected to post growth in H2 2022 and into 2023.

    Retail sales for July were also reported last week, unchanged from June due in part to lower prices at the pump and falling auto sales. Excluding both gas and autos Retail Sales increased 0.7% for the month.

    h2 As Q2 Earnings Season Closes, LERI Ends At Its Highest Level in Over A Year/h2

    The LERI (Late Earnings Report Index) tracks which companies are confirming off-trend earnings dates. Academic research shows when a corporation reports earnings later in the quarter than they have historically, it typically signals bad news to come on the conference call, and the reverse is true, an early earnings date suggests good news will be shared. The idea is that you’d prefer to delay bad news, but when you have good news you want to run out and share it.

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    Despite better than expected earnings, the LERI is still at its highest level in over a year with a reading of 160, surpassing Q1 2020’s reading of 147 which reflects the uncertainty of the first few weeks of Coronavirus lockdowns globally. 

     A LERI reading over 100 indicates more companies are delaying reports and is meant to be watched carefully. While the LERI reading of 150 is the highest we’ve seen since Q4 2020, it’s still nowhere near as high as we saw in the last three quarters of that year in the midst of the COVID-19 pandemic and lockdowns. Those quarters clocked LERI readings of 1380, 656 and 309, respectively. In any case, a gradual increase this quarter continues to suggest that US companies are feeling uncertain about their future growth potential. In terms of raw numbers, 50 companies have confirmed earlier Q2 earnings dates, while 80 have confirmed later than normal earnings dates.