Recession fears hurt US corporate profits

New York – Publicly traded companies America It is expected to deliver the slowest Q2 revenue growth since the end of 2020, amid fears of a slowdown in outlook. Analysts consulted say that the results of this period could pose a challenge to the future performance of stocks on Wall Street, crystallizing the effect of rising interest rates to curb inflation in the country. Estado/Broadcast.

Earnings season in the US kicks off this week, with financial giants such as Citigroup, JP Morgan, Wells Fargo and Morgan Stanley releasing their numbers for the period. Apart from big banks, PepsiCo is also pulling the line on food and beverages.

Revenue at companies in the S&P 500, which combines the 500 largest companies listed in the US, is expected to rise 4.1% in the second quarter, according to a downwardly revised estimate from US FactSet. Earlier, the forecast was a high of 5.9%.

This would be the slowest earnings growth reported by the index since growth of 3.8% was recorded in the fourth quarter of 2020, and economies were hit by lockdowns implemented to contain the Covid-19 pandemic.

“Six of the 11 sectors (S&P 500) are expected to post earnings growth in the quarter driven by energy, industrials and materials,” said John Butters, Faxet vice president and senior earnings analyst.

However, in terms of earnings, analysts are optimistic. According to FacSet’s estimate, there was a 10.1% increase in the second quarter compared to the previous year, against the previous forecast of 9.6%.

The interest rate hike echoed on Wall Street

According to bankers and economic advisers on Wall Street, the 2nd quarter balance sheet results are seen as one of the key drivers for the future performance of US-listed companies’ stocks. However, facing the risk of persistent inflation and recession, the horizon is not great.

“Although revenue growth is expected to be relatively healthy, we are disappointed by the consensus for profit margins,” says Daniel Grosvenor, director of global equity strategy at Oxford Economics.

According to Morgan Stanley, earnings estimates for the S&P 500 and Nasdaq 100 combined for the 100 largest non-financial companies in the tech exchange are 20% higher than seen since the Great Financial Crisis of 2009. Key points indicate decline. “Future earnings expectations in the coming months from these high levels,” says the North American bank’s financial analysis team.

The companies themselves are already showing a negative forecast for earnings per share at the end of Q2 and 2022. Of the more than 100 firms that gave guidance for the April-June range, 71 were negative and 32 were positive. “In fact, Q2 has the most S&P 500 companies posting negative earnings per share since Q4 2019,” notes FacSet’s Butters.

In addition to the macro view, negative signals for the 2nd quarter are supported by strong losses on Wall Street. Fears are growing that the world’s largest economy could soon face a recession, with the U.S. facing the highest inflation in four decades and the tightening of monetary policy at its most intense, affecting risk appetite on Wall Street. As a result, the S&P 500 had its worst half since 1970, and inflation also haunted the United States in the first half of the year.