I hope you’re having a good summer as we roll into the second half of July. Back in April I discussed consensus earnings for this year and specifically Ed Yardeni’s projections.
As we head into second quarter earnings, I thought it would be interesting to take a look at the evolution of projections and actual earnings, and also what they might mean for stocks. Keep in mind that these are just projections and the actual numbers could be higher or lower.
As usual, earnings season is kicked off by the banks. Many of the big banks report tomorrow. Here’s the list.
On Thursday we will see one of the first big ones outside of the banks (Taiwan Semiconductor). That should set the tone for semiconductor companies and expectations.
Speaking of semiconductor companies, SK Hynix (a South Korean semi company) listed their shares in the US, under what are called ADR shares (American Depository Receipt). Basically, it’s foreign companies listed in the United States and priced in US dollars. They listed their shares at $149 per share and it immediately opened at $170 per share, hit $175 and closed the day at $168.17…and all that was on Friday! Today it is trading at $153. Again, if you bought at the initial price of $149, you’re still ok, but if you bought any time during the first day, not so much. It will be interesting to see how examples like this and SpaceX impact potential IPOs that are rumored for the coming months, such as Anthropic and OpenAI.
Getting back to earnings season, back in April Ed Yardeni was projecting $310 per share in earnings and was reluctant to raise it due to the uncertain nature of the war in Iran. Fast forward to today and many things have changed, while some haven’t. If you want to look at that weekly piece, it was from April 13th.
Today, Ed has increased his composite earnings expectations for 2026 for $310 to $330 per share.
Meanwhile forward consensus earnings have moved up from $372 to $403.80 for fiscal year 2027.
And it’s not just large caps that are participating in this upward revision of estimates. Small and mid-caps are also being adjusted higher.
If you believe the numbers, Ed still thinks the market (S&P 500) will hit 8,250 by year end.
Another closely watched market analyst Tom Lee also has similar view, with a slight tweak. He expects the S&P to be between 7700-8000 by year end, BUT…
He cautions that we may see a pullback between August and October.
As you likely already know, stocks don’t move up in straight lines. Many times there are volatile down periods before the next up period. That might explain our model still being “conservative” and not really getting closer to turning back “positive”.
It doesn’t mean we’re not in the “market.” It just means the stocks we own are more conservative than they otherwise could be. We, of course, are looking for that turn, but as of yet, we haven’t seen things get closer to doing so.
Finally, we are officially at our 30-day window for SpaceX.
For those again that got in at the IPO price, they are still in the money, but only by a few dollars. We will be heading for the first earnings report in August and also the first release of tied up stock. That may add a bit more pressure on the stock at that time. Again, this isn’t to say I don’t like the company, just that it is possible to see the stock trading under $100 within the next year. It might be time to take another look at that point. We will see how things progress.
That’s it for this week, I hope you have a good week. If you have any questions or comments about this or any other topic. We will certainly be happy to have a conversation.