When it comes to corporate earnings, good isn't good enough. What matters is making more than anyone expected — a feat a select group of S&P 500 companies just pulled off.
Eleven profitable companies in the S&P 500 — including Paramount Global, Constellation Energy and Amazon.com — crushed analysts' profit forecasts for the just-reported second quarter by 70% or more, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
And this makes them standouts in a pretty competitive field. More than 85% of S&P 500 companies reported second-quarter results, says John Butters of FactSet. And 79% of those beat earnings forecasts — which tops the 73% of those that did in the previous 10 years on average.
"Both the number of companies reporting positive earnings surprises and the magnitude of these earnings surprises are above their 10-year averages," Butters says.
S&P 500 Investors Needed Good News
Coming into the quarter, S&P 500 investors were hoping companies would do better than they feared. And in many ways, they did.
Back in June, investors expected S&P 500 earnings would fall 7% during the second quarter, says FactSet. But now — with most S&P 500 results in and coming in stronger than thought — S&P 500 profit is only down 5.2% from the second quarter of 2022. And that's mostly due to bigger-than-expected surprises. S&P 500 companies, on average, topped earnings expectations by 7.2%.
Sure, that was a relief for investors. But not enough of one. Shares of S&P 500 companies that topped earnings expectations in the second quarter actually fell 0.5%, FactSet says, vs. the typical 1% gain.
To impress in the second quarter, you had to beat by more. And some S&P 500 companies managed to pull it off.
Meme Stock Makes Good
Paramount Global, the Hollywood company swept up in the meme stock rally, actually out-delivered during the second quarter.
The company reported a quarterly profit of 10 cents a share, topping views calling for the firm to lose 2 cents a share during the period. That's a beat of 671% on an adjusted basis, which is the largest positive earnings surprise in the S&P 500.
Investors, though, are still skeptical that there's a sequel on the way. Paramount Global's stock is down 3% this year. The company's earnings are expected to drop 68% this year to 55 cents a share. A profit bounce isn't seen coming until 2024, when analysts expect earnings to swell by 156%.
Other Huge S&P 500 Surprises
When it comes to profits that blow past estimates, Constellation Energy served up a huge surprise. The Baltimore-based electric utility turned a quarterly profit of $3.67 a share. That topped views for 78 cents by 370%. No wonder shares of the electric utility are up nearly 22% this year. And that's on top of a 1.1% dividend yield.
What about the Magnificent Seven stocks in the S&P 500? The standout there is online retailer Amazon.com. The company earned 65 cents a share in the period, topping views by more than 91%. And it's a good thing, too. Shares of Amazon are already up a whopping 67% this year.
So while investors feared the worst in the second quarter, plenty of S&P 500 companies still delivered — and then some.
Biggest S&P 500 Earnings Upside Surprises
In the second quarter of 2023
| Company | Ticker | YTD change | Q2 earning surprise | Sector |
|---|---|---|---|---|
| Paramount Global | -3.2% | 670.5%* | Communication Services | |
| Intel | 32.5 | 546.4* | Information Technology | |
| Constellation Energy | 21.6 | 370.5 | Utilities | |
| Qorvo | 17.1 | 126.6 | Information Technology | |
| AvalonBay Communities | 14.9 | 120.5 | Real Estate | |
| First Solar | 30.9 | 96.8 | Information Technology | |
| Amazon.com | 66.5 | 91.1 | Consumer Discretionary | |
| WestRock | -1.1 | 78 | Materials | |
| CarMax | 40.9 | 77.7 | Consumer Discretionary | |
| Cincinnati Financial | 5.9 | 72.8 | Financials | |
| Newell Brands | -18.4 | 71.4 | Consumer Discretionary |
