JPMorgan: Q2 Earnings - FJElite
- The Q2 reporting season is well advanced, with around 80 - 85° o of companies having reported in both the US and in Europe. In this final edition of our Q2 tracker, we summarize the key takeaways.
- Earnings deliver)' this quarter was strong, with a positive EPS surprise seen in all regions and a solid breadth of beats; the proportion of companies with reported EPS ahead of estimates rose sharply in both the US and Europe - see Fig 1. S&P500 blended EPS tracked higher, despite already elevated expectations entering the reporting season - see Fig 3. Encouragingly, of the US companies that have provided guidance data, the percentage that has revised up their profit outlook is the highest since 2021 - sec Fig 15.
- Regionally, earnings growth of *25°o y y and +23% y y in the US and Europe, respectively, was better than consensus expectations. We note that the gap between US and European EPS growth has narrowed meaningfully, both at an aggregate level and at a median level, where median EPS growth for both regions stands at +12% y y - see Fig 19. Top-line growth was healthy too. at + 14° ó y/y in the US and +10% y/y in Europe.
- At a sector level, a large share of the earnings growth in both regions is being driven by the Energy sector, which was helped by the conllict-drivcn rise in energy prices. Financials were a notable driver of earnings in both regions too. as well as Tech. Ex-Energy EPS growth stands at +19% y/y in the US. and +13% y/y in Europe. After adjusting for Amazon and Alphabet's mark-ups on private/strategic equity stakes. Mag-7 EPS growth (excluding Nvidia, which has not yet reported) is slightly below S&P500 ex Mag-7 lor the first time since 2022 - see Fig 2. In the US. Cyclical sectors' EPS growth was ahead of Defensives again in Q2 - see Fig 18.
- Despite a solid earnings season, the stock-price reaction has been relatively muted. Even companies that delivered beats have often seen their shares underperform, particularly in Tech. This likely reflects a combination of elevated expectations, crowded investor positioning in the sector, and an increased focus on capex commentary.