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What second-quarter earnings could mean for investors

The second-quarter earnings season shows plenty of reason to be optimistic not only about the markets, but also the U.S. economy as a whole. Not only are earnings exceeding expectations in many sectors, companies are also reporting sales revenue figures that, finally, are showing organic growth.

Roughly half of the S&P 500 companies have announced earnings so far. Nearly eight out of 10 companies have reported earnings that beat expectations, while two-thirds have also topped revenue predictions.

For example, Twitter surprised many observers when it reported second-quarter results this week. The microblogging service’s 2Q revenue rose 124% over last year to $312 million. Analysts expected $283 million. Twitter also reported earnings of two cents a share, outpacing analysts’ predictions of a loss of one cent a share.

Today, corporate profit margins are relatively high due to all their cost cutting spurred by the Great Recession. This is enabling many companies to show growth despite flat sales figures. Now with sales figures showing improvement, these facts bode well for overall market growth and economic growth. Investors and their advisors should keep a close watch on the rest of earnings season and the impact on the equities markets.