Results of the reporting season in the US for the first quarter: profits grew by only 4%, and the margin fell

Results of the reporting season in the US for the first quarter: profits grew by only 4%, and the margin fell

In June, the last companies from S&P 500 reported for the first quarter. This is what happened to their profits now and this is how it was on average over ten years:

  1. Better than expectations: now - 77%, average - 72% companies.
  2. Worse than expectations: now - 20%, average - 20% companies.
  3. At the level of expectations: now - 3%, average - 8% companies.

Here's how S's revenue and profit have changed&P 500 and its individual sectors.

Revenue

Compared to the first quarter of 2021, aggregate sales of companies from the S&P 500 up by 13,6%. Excellent result, but there is a nuance - this is a high level of inflation.

Over the year, prices for goods and services in the US officially increased by 8-9%. And that means, what are the real sales of companies, that is, net of inflation, increased much less.

And for some, it's a problem.: not all companies can raise their prices quickly. For example, these are sellers of goods of second necessity. Here, sales growth was one of the weakest - an average of 8-9%, that is, at the level of inflation. As a result, profits and margins of companies fell, but more on that later.

But in the oil and gas sector, the situation is reversed.: here revenue increased the most - by 56,1%. Over the year, Brent crude oil has risen in price by 45%, which had a good effect on the incomes of oil workers.

Sales in the raw materials sector also grew significantly, which is now being pulled by fertilizer producers, - on 26%.

Results of the reporting season in the US for the first quarter: profits grew by only 4%, and the margin fell

Quarterly revenue of sectors compared to last year

Oil & Gas +56,1%
Raw materials +26,0%
The property +16,9%
Industry +16,0%
healthcare +13,8%
S&P 500 +13,6%
Technologies +12,1%
Utilities +11,4%
Essential goods +9,5%
Goods of second necessity +8,6%
Communications +8,1%
Finance −0,6%

+56,1%

Profit

Year-on-year total operating profit S&P 500 rose by 4,2% – the worst result in the last three years, except for the collapse during the coronacrisis. Probably, rapid profit growth, which happened in 2020-2021, is a thing of the past.

Despite the overall positive dynamics, profits in some sectors fell. For example, it's utilities, Communications and Finance. But the main loser is still the same – goods of second necessity.. The sector lost in profit immediately 41%.

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The oil and gas and raw materials sectors increased the most profits - plus 324.4 and 55,3%.

Results of the reporting season in the US for the first quarter: profits grew by only 4%, and the margin fell

Quarterly profit of sectors compared to last year

Oil & Gas +324,4%
Raw materials +55,3%
The property +37,6%
Industry +33,6%
Technologies +17,0%
Essential goods +7,8%
healthcare +7,6%
S&P 500 +4,2%
Utilities −1,3%
Communications −10,0%
Finance −27,2%
Goods of second necessity −41,0%

+324,4%

Profitability

Due to rising gasoline costs, raw material, Labor, logistics and other operating margin S&P 500 decreased from 13 to 11,9%. And that means, that the cost of production of goods has increased more, than revenue.

The inability of companies from some sectors to shift costs to the buyer led to a decline in profitability.. First of all, these are cyclical sectors: all the same communications, finance, goods of second necessity.

But there is good news.: current margin S&The P 500 is still above the historical level in 10%. The margin of safety of the index still remains, although the situation varies from sector to sector.

Results of the reporting season in the US for the first quarter: profits grew by only 4%, and the margin fell

Quarterly sector margin compared to last year

Oil & Gas 4,0 → 11,0%
The property 17,9 → 21,0%
Raw materials 11,0 → 13,6%
Industry 6,8 → 7,8%
Technologies 22,0 → 23,0%
Essential goods 7,2 → 7,1%
healthcare 10,0 → 9,4%
S&P 500 13,0 → 11,9%
Utilities 14,6 → 12,9%
Communications 19,2 → 16,0%
Goods of second necessity 7,9 → 4,3%
Finance 24,4 → 17,9%

4,0 → 11,0%

New Reporting Season

Short-term stock price is affected by a variety of things: macrostatistics, experts' forecasts, geopolitics and so on. At a long distance, the value of shares determines the dynamics of profit..

According to the forecast, Profit S&P 500 year-on-year in the second quarter will grow by 5,9%, and by the end of 2022 — on 7,8%. Good prognosis, but he, seems, does not take into account the possible downturn in the US economy.

Season of Reports for the second quarter will begin soon, in mid-July. Company results and executive statements will show, how business copes with the main problems today: high inflation, tough politics FED and weak consumer activity.

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