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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

Oct 28, 2021 - Technology

Amazon revenue down in third quarter

Illustration: Shoshana Gordon/Axios

Amazon posted disappointing third-quarter results Thursday, with earnings and revenue lower than expected. Its shares dropped more than 4% in after-hours trading.

Why it matters: Amazon's business, which has boomed over the last year, has slowed just ahead of the holiday season, dragged down by supply chain problems, labor shortages and higher costs for shipping and freight due to the pandemic.

By the numbers:

  • Earnings: $6.12 per share vs. $8.92 per share expected, per CNBC
  • Revenue: $110.81 billion vs. $111.6 billion expected, per CNBC
  • Amazon Web Services: Sales rose to $16.11 billion vs. $15.48 expected, helping Amazon avoid a loss this quarter, per CNBC

What they're saying: CEO Andy Jassy said he expected the company to face billions of dollars of additional costs while minimizing customer disruption: "It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners.”

  • Amazon has said it will hire hundreds of thousands of permanent and seasonal employees across the U.S. ahead of the holidays.

What's next: Amazon forecasts fourth quarter sales between $130 billion and $140 billion. Analysts had been expecting around $142.1 billion.

Kate Marino, author of Markets
Oct 29, 2021 - Economy & Business

Don't overthink the third-quarter GDP slowdown

Data: FRED; Chart: Axios Visuals

Third-quarter GDP growth was muted — more so than many expected. But the market shrugged off the slowdown, which took annualized quarterly growth to 2% from 6.7% in the Q2 reopening frenzy.

Why it matters: We have, for the most part, economically moved past Delta, and the signals for a fourth-quarter rebound are aplenty.

Updated 3 hours ago - Energy & Environment

Thousands without power as "hazardous" winter storm lashes East Coast

Satellite imagery of the Northeastern U.S. taken by NOAA on Jan. 17. Photo: NOAA

A major winter storm lashed much of the East Coast Sunday and Monday, causing widespread power outages and disrupting travel over the holiday weekend.

The latest: Authorities in North Carolina confirmed that two people died in a car crash and that they responded 600 vehicle accidents during the storm on Sunday, per the Washington Post.