To The Moon

Key takeaways:

1. An Unusual Volatile Earnings Season
2. Blended Earnings Growth for Q4 Above 30%
3. Inflation Mentions Dominate Q4 Earnings Calls.
4. Has Inflation Changed Net Profit Margin Expectations?

Did you benifit from the earnings season by your holdings? Please share in the comment section.

The intense Q4 2021 earnings season is coming to an end.

So far the most major US listed companies have released their quarterly earnings reports.

There are less than 100 S&P 500 companies that have not reported actual earnings for the fourth quarter to date, data from FactSet. Generally Earnings Season occurs about six weeks after the start of the season. For the fourth quarter, we often see an increasing number of earnings reports released in the second week of January, then the number of earnings reports starts to decreaseafter six weeks later .

Typically, investors bet on stock volatility by looking ahead to earnings performance.

If the results of the financial report exceed expectations, the company's stock price will likely to rise. On the contrary, if the financial report data is lower than market expectations, the stock price will ten to fall.

It appears that this fiscal quarter has been accompanied by more than usual share price volatility, whether it's an eye-catching or eye-popping earnings release.

1. An Unusual Volatile Earnings Season

For example: $(Amazon)$, which beat expectations, rose 13.5% after reporting strong earnings, and Upstart Holdings $(UPST)$ jumped 35% after reporting better-than-expected earnings and announcing a buy back.

However, the falling companies are also hurt investors heavily:

• Facebook’s first financial report after changing its name to $(Meta)$ showed that the company’s global users decreased by 500,000 in the fourth quarter of 2021.  $(Meta)$ shares tumbled 23%, wiping $240 billion off its market value in a day, the biggest drop in U.S. stock history. Other social media stocks were also dragged down, with$( Snap)$ tumbling 18%.
• $(Shopify)$ fell 17% after earnings report released,
• $(Roblox )$ fell 16% after the market after announced its 2021 Q4 earnings report on February 16 and fell another 26%,
• $(Affirm)$'s stock price plummeted from a rise of more than 10% to a 21% plunge after the official announcement of the financial report,
• $(Netflix)$ plummeted nearly 10% after the company reported its second-quarter earnings,
• $(AppLovin)$ stock dropped nearly 20% after 2022 outlook disappoints,
• The former Pandemic beneficiary stock American fitness stock $(Peloton)$ fell 11% on the day it announced lower-than-expected earnings data, and it has fallen 80% from its highest price.

Is such a big decline due to the fundamentals of the entire macro marketdeteriorating, or is it because the companies' performance was lower than expected and is "punished" by the market and accelerated to squeeze out the excess "bubble"? 

There might have part of reason that the companies business is not positive under the pandemic environment, Then，will the performance of this quarter's corporate earnings turn around market sentiment and make the stock market even worse?

Analysis Comments：Chris Vecchio, a senior currency strategist at DailyFX shared that the Q4 2022 earnings season won't change the market's sentiment,but a the geopolitical risk between Russia and Ukraine is worth worrying about.  Full video please click . Earnings Season Won't Sway Market Sentiment

2. Below are some Highlights of Q4 2021 Earnings Season：

• Blended Earnings Growth for Q4 Above 30%

According to the Data FactSet, 77% of companies beating EPS estimates is higher than the five-year averageof 76%, but the amount by which companies are beating estimates is equal to the five-year average. As a result, the S&P 500 index is reporting higher earnings for the fourth quarter today relative to the end of last week and relative to the end of the quarter.Positive earnings surprises reported by companies in multiple sectors, led by the Health Care sector, were responsible for the improvement in overall earnings for the index during the past week. 

Positive earnings surprises reported by companies in the Consumer Discretionary, Information Technology, Financials, and Health Care sectors have been the top contributors to the overall increase in earnings for the index since the end of the fourth quarter.The blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings growth rate for the fourth quarter is 30.3%, it will mark the fourth straight quarter of earnings growth above 30% for the index.

• Inflation Mentions Dominate Q4 Earnings Calls.

The market continues to be concerned about higher inflation. We can seeinflation mentions dominate Q4 earnings calls. Through Document Search, FactSet searched for the term “inflation” in the conference call transcripts of all the S&P 500 companies that conducted earnings conference calls from December 15 through February 10.Of these 337 companies, 246 have cited the term “inflation” during their earnings calls for the fourth quarter, which is well above the five-year average of 144.At the sector level, the Industrials (50) and Financials (49) sectors have the highest number of companies that cited “inflation” on earnings calls for Q4. On the other hand, the Consumer Staples (100%) and Materials (90%) sectors have the highest percentages of companies that cited “inflation” on their Q4 earnings calls during this period.However, the final number will likely finish even higher, the current record is 305, which occurred in Q3 2021.Consumer prices increased by 7.5% in January, which was the largest year-over-year increase since 1982.

3. Has Inflation Changed Net Profit Margin Expectations?

Given the high number of S&P 500 companies that have cited “inflation” on Q4 earnings calls, have net profit margin expectations for the S&P 500 for Q1 2022 and CY 2022 been revised?

Looking Ahead

According to FactSet, The current net profit margin estimate of 12.3% for Q1 2022 is slightly below the estimate of 12.4% on December 31, while the current net profit margin estimate of 12.7% for CY 2022 is slightly below estimate of 12.8% on December 31.

For the full year, the blended earnings growth rate for CY 2021 is 47.4%. Looking ahead to the first half of CY 2022, analysts expect earnings growth of 5.5% for Q1 2022 and 4.8% for Q2 2022.

Final Question For You:

Finally, Hope tigers has benifit from the earnings season through your holdings? Please share in the comment section.