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Market Update: 10-18-21

Q3 EARNINGS PREVIEW: LESS UPSIDE

We have used most of the superlatives we know to describe corporate America’s stunning performances over the past two earnings seasons. Despite lofty expections, results exceeded estimates by the biggest margins we’ve ever seen (and one of the authors of this report has been doing this for 23 years). We expect solid earnings gains during the upcoming third-quarter earnings season, but upside surprises will be smaller. Unfortunately, we won’t need as many superlatives.

 

LOOK FOR MANY—BUT SMALLER—UPSIDE SURPRISES

Earnings growth in the first half of 2021 was amazingly strong, with S&P 500 Index earnings growing 52% and 90% year over year in the first and second quarters, shown in Figure 1. The growth was stellar, but the most impressive thing to us about these numbers was the more than 20 percentage point upside surprises for both quarters. Those surprises came after the bar had already been raised following strong earnings results during the second half of 2020.

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Susan Jerris

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LPL Registered Principal 
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Anthony Roble

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Roble

LPL Registered Administrative Assistant
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Diana Esperon

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Esperon

Administrative Assistant
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