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Illustration: Aïda Amer/Axios

Companies have been reporting earnings growth that's way up — even overshooting expectations put out by Wall Street’s analysts.

Why it matters: Earnings growth is the key driver of stock prices.

  • Going into earnings season, companies had signaled to analysts that earnings would be stronger than what analysts were forecasting, forcing those analysts to revise up their already high estimates.
  • The fact that stock prices have been trading near all-time highs suggests a lot of optimism for future earnings had already been priced into the market.

By the numbers: Through Friday, 24% of S&P 500 companies reported Q2 2021 quarterly financial results, according to FactSet.

  • Of those companies, a whopping 88% have reported better-than-expected earnings. If the trend continues, it would be the highest percentage of quarterly beats since FactSet started tracking this data in 2008.
  • Altogether, these companies on average have reported earnings that are 19% above what analysts had forecast, which is above the five-year average, a 7.8% beat.
  • At this pace, S&P 500 companies will have reported earnings growth of 74.2% year over year, which would be the highest growth rate since Q4 2009.

The big picture: What makes this performance notable is that it occurred during a time when inflation heated up by more than what economists were expecting, and executives had been warning about it.

What they’re saying: "I’m not surprised by the strong earnings results; it’s in keeping with high expectations supported by massive stimulus," Principal Global Asset Allocation CIO Todd Jablonski tells Axios.

  • "It’s possible, however, that Q2 will mark both peak recovery for the U.S. economy and earnings improvement expectations. The outlook for the second half of 2021 appears more complicated, given concerns over economic momentum and inflationary forces."

What to watch: A third of S&P 500 companies are announcing earnings this week. Big names providing results include tech giants Apple, Microsoft, Alphabet, Amazon and Facebook.

The bottom line: Just because expectations for earnings seem high doesn’t mean companies can’t beat them. Analysts are giving their best estimates in a turbulent time, and companies are doing their best not to disappoint.

Editor's note: This post has been corrected to show it was Principal Global Asset Allocation CIO Todd Jablonski who provided a quote to Axios (not Principal Global Investors chief strategist Seema Shah).

Go deeper

Apparel makers' new supply problem

Illustration: Aïda Amer/Axios

New COVID lockdowns in Vietnam are creating supply problems for some well-known U.S. brands.

Why it matters: Big retailers have reported healthy demand from consumers, even amid elevated levels of COVID infections in recent weeks. The main challenge hindering sales has been limited supply.

Miriam Kramer, author of Space
3 hours ago - Science

All-civilian Inspiration4 is back on Earth after flight to space

A side-by-side of the Inspiration4 crew and a shot of their capsule on the way back to Earth. Photo: SpaceX

The all-civilian Inspiration4 crew is back on Earth after their three-day mission in orbit.

The big picture: The launch and landing of this fully amateur, private space crew marks a changing of the guard from spaceflight being a largely government-led venture to being under the purview of private companies.

28 U.S. citizens depart Afghanistan on Qatar Airways flight

Passengers board a Qatar Airways aircraft bound to Qatar at the airport in Kabul on September 10, 2021. Photo: Aamir Qureshi/AFP via Getty Images

The State Department on Saturday confirmed that a Qatar Airways charter flight left Kabul on Friday with 28 U.S. citizens and seven lawful permanent residents on board.

The big picture: Friday's flight is the third such airlift by Qatar Airways since the Taliban takeover of Afghanistan, AP reports.