John Stoltzfus, chief market strategist at Oppenheimer, is out with a new research note giving a quick update on some of the major macroeconomic takeaways from second quarter earnings announcements.
Overall, the reports show that things are going pretty well. And today’s better than expected GDP print corroborates these observations.
Stoltzfus highlights the transportation sector as having performed particular well in the second quarter, noting that the Dow Jones Transportation Average reported year-over-year earnings growth of about 22% on a more than 7% increase in sales.
“Within the transportation industry group, railroads have stood out. Norfolk Southern Corp (NSC) recorded record revenues in the quarter, citing an 8% increase in shipments. Kansas City Southern (KSU), which operates between the US and Mexico, increased volumes by 7%. Union Pacific Corp reported earnings in line with expectations, up 20.7% from a year ago on sales growth of 10%,” Stoltzfus writes.
“We believe increased business activity in the railroads provides evidence of healthy economic growth, increased business production as well as the sustainability of economic expansion.”
Stoltzfus also viewed Caterpillar’s results positively, as they showed organic North American sales growth of 6%.
An improvement in consumer spending was seen by management at Starwood Hotels, which beat by 2% on earnings per share, while Visa was more cautious saying that they hadn’t seen, “any signs of acceleration in the pace of the economic recovery.”
With more than half the S&P 500 having reported earnings, Stoltzfus and his team find that among components of the benchmark index, positive surprises for sales growth are outnumbering negative surprises by about 2:1, while earnings growth surprises are favouring positive results by more than 3:1.
This table is broken down the S&P 500’s sectors, which include Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Healthcare, Financials, Information Technology, Telecommunications, and Utilities.
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