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Week of July 26, 2010

With roughly 35% of S&P 500 companies having reported so far, Q2/10 earnings are coming in above consensus estimates and the “beat ratio” is currently hovering near 78% (average is 64%). S&P 500 quarterly EPS is expected to surpass US$20 in Q2/10, 45% above last year’s US$13.81 level.

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Week of July 19, 2010

The Q2 earnings parade got off to a solid start last week, highlighting that the profit recovery, which started 15 months ago in Q1/09, was still going relatively strong. Although it is still early days in the reporting season, the string of above-average “beat ratios” could remain intact in Q2. The S&P 500 beat ratio is hovering near the 80% level so far in Q2, above its historical average.

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Week of July 12th, 2010

Q2 Earnings could Positively Surprise

Although economic worries hit equity markets last quarter, we would expect another solid earnings season for the S&P 500. We see four reasons why the upcoming Q2 earnings season could once again surprise on the upside:

Economic figures published so far in Q2 have, on average, been firmer than in Q1.
Recent earnings revisions have been only mildly negative.
Negative to Positive (N/P) preannouncement ratio is below average.
S&P 500 earnings sensitivity to Europe is relatively low.

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Week of July 5th, 2010

After a strong start to the year (the S&P 500 was up 8% up to April 23), global equities entered the "twilight zone" in May and June. The MSCI AC World index tumbled 12.7% in Q2 (worst quarter since Q4/08) as euro debt worries, slowing Chinese growth, and stumbling U.S. consumer and housing data weighed heavily on investor sentiment. Supported by the recent tsunami of bad news, long-term bonds posted their best quarter since Q4/08 and U.S. 10-Yr yields declined from 4% at the start of April to 2.93% at the end of June.

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