The median sales price for new homes declined to $361,800, which was -4.96% below last month but still +6.1% higher than at this time last year. This report was a big miss no matter which way you look at it. There is a saying, “the cure for higher prices, is higher prices.” Higher input costs for builders, plus some sticker shock for buyers, is most likely behind the decline.
Monthly data can be volatile even during normal times. I suspect pandemic related factors are the main culprit here. If we look at a 6 or 12 month moving average of new home sales, it remains near the high point of the post 2008 expansion. I don’t see this as a threat to the economic expansion, but it bears monitoring.
Consumer Confidence index came in at 129.1 for July, +0.2% higher than last month (which was revised up from 127.3 to 128.9), and +40.8% annualized.
“Consumers’ appraisal of present-day conditions held steady, suggesting economic growth in Q3 is off to a strong start. Consumers’ optimism about the short-term outlook didn’t waver, and they continued to expect that business conditions, jobs, and personal financial prospects will improve.
"Short-term inflation expectations eased slightly but remained elevated. Spending intentions picked up in July, with a larger percentage of consumers saying they planned to purchase homes, automobiles, and major appliances in the coming months. Thus, consumer spending should continue to support robust economic growth in the second half of 2021.”
Personal incomes excluding transfer receipts rose +0.2% in June, and +4.7% higher than June 2020 results.
h2 Notable earnings/h2
Quarterly revenues continue to break company records. Results came in 6.4% above street expectations, for a year-over-year growth rate of 99% (after a +92% growth rate last quarter), the highest growth rate in over 10 years.
Gross margins improved to 47.5%, while operating margins (21.5%) more than doubled from Q2 2020 results. Operating income grew 380%.
Last week was by far the busiest week of earnings, with about half the companies that are either in the portfolio or on the shopping list, reporting results. Not enough time to review them all here, so I put up the earnings scorecard for review.
91% beat their earnings estimates by an average of 18% above expectations, led by Shopify (NYSE:SHOP), Tesla (NASDAQ:TSLA), and Google (NASDAQ:GOOGL).
83% beat revenue estimates by an average of 4.3% above estimates, led by Twilio (NYSE:TWLO), and Apple (NASDAQ:AAPL).
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Average year-over-year growth rate in EPS was +54%. Average year-over-year growth rate in revenue was +38%.
h2 Summary/h2
The majority of earnings and data continued to support a continued economic recovery. Progress on the infrastructure bill helped boost sentiment for the more cyclical sectors of the market like Industrials. That may offset some of the “peak growth” concerns in the technology space.
Apple, Facebook (NASDAQ:FB), and PayPal (NASDAQ:PYPL) all issued lower forward guidance, and Amazon (NASDAQ:AMZN) reported a rare miss on revenues along with guidance that fell short of street expectations.
Let’s put this in perspective though, even with the lower guidance, these companies still have growth rates most companies can only dream of. There wasn’t anything in the reports this past week that would cause me to sell any of the holdings. I would see any excessive dip as a buying opportunity if it were to occur.
I’m not sure we have ever seen a 5 quarter earnings streak like this; with a consistent 80%+ beat rate and results coming in between 15% to 22% above expectations. Q2 earnings growth rate of 89% is unlikely to be topped in a very long time (if ever), but Q3 and Q4 look likely to come in around +20%, and then may moderate significantly in the first half of 2022.
h2 This week:/h2
For economic data we have ISM Manufacturing PMI on Monday, ISM Services PMI on Wednesday, and the BLS employment report on Friday.
For earnings, we have 154 S&P 500 companies reporting. I’ll be paying attention to Booking Holdings (NASDAQ:BKNG)—formerly Priceline.com—and Uber (NYSE:UBER) on Wednesday, and Square (NYSE:SQ) on Thursday.
/h2
Written By:
Michael Gouvalaris
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