{"id":9631,"date":"2021-06-07T17:07:00","date_gmt":"2021-06-07T17:07:00","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=9631"},"modified":"2022-02-26T13:05:52","modified_gmt":"2022-02-26T13:05:52","slug":"corporate-earnings-should-be-the-key-investor-focus","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/corporate-earnings-should-be-the-key-investor-focus\/","title":{"rendered":"Corporate Earnings Should be the Key Investor Focus"},"content":{"rendered":"\n<p>The U.S. economy is growing, vaccination rates are slowing\nbut remain elevated, and restrictions are falling away quickly. Pandemic risks\nare falling, and corporations are posting very strong earnings numbers.<sup>1<\/sup><\/p>\n\n\n\n<p>Yet, even still, we keep hearing about inflation concerns,\nlabor market shortages, supply chain bottlenecks, too much government spending,\nand frothy asset classes. Don\u2019t get me wrong \u2013 every one of those economic fundamentals\nmatters greatly. But I also think it\u2019s true that <em>corporate<\/em> <em>earnings matter more<\/em>, and no one seems\nto want to talk about it. Instead, the \u201cwall of worry\u201d continues to dominate\nthe headlines, and I think that\u2019s good news for stocks. <\/p>\n\n\n\n<p>__________________________________________________________________________<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_06_07&amp;content=stock_market_outlook_report\">Taking Cues from Headlines May Be Costly\u2026Time to Focus on the Fundamentals<\/a><\/strong><\/p>\n\n\n\n<p>The\npressures of fearful headlines and media hysteria may cause investors to worry\nand make knee-jerk responses. Instead of letting these factors affect your\ncurrent financial goals, I recommend making decisions based on data and\nfundamentals. To help you do this, I am offering all readers our just-released\nStock Market Outlook report. This report contains some of our key forecasts to\nconsider such as: <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Zacks\nrank S&amp;P 500 sector picks<\/em><\/li><li><em>Zacks\nJune view on equity markets<\/em><\/li><li><em>What\nproduces 2021 optimism?<\/em><\/li><li><em>Zacks\nforecasts for the remainder of the year<\/em><\/li><li><em>Top\nstocks in top industries<\/em><\/li><li><em>Sell-side\nand buy-side consensus<\/em><\/li><li><em>And\nmuch more<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!&nbsp;<br> <strong><br>IT\u2019S FREE.&nbsp;<a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_06_07&amp;content=stock_market_outlook_report\">Download the Just-Released June 2021 Stock Market Outlook<\/a><sup>2<\/sup><\/strong><\/p>\n\n\n\n<p>__________________________________________________________________________<\/p>\n\n\n\n<p>As I write, 477 S&amp;P 500 have reported Q1 2021 earnings,\nand the results were arguably historic. 86% of reporting companies beat\nearnings-per-share estimates and 77.4% beat revenue estimates. These are big\nnumbers. <\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/pic1-2-1024x288.png\" alt=\"\" class=\"wp-image-9632\"\/><\/figure>\n\n\n\n<p>Earnings for reporting companies were up\n+48.4% from the same period last year, on +10.1% higher revenues. Of course,\nthese figures come with an asterisk \u2013 the same period last year included March\n2020, when the pandemic ravaged the economy. Looking ahead to Q2 2021 earnings,\nwe could see an even bigger year-over-year jump, given the effect of the global\neconomic shutdown in Q2 2020. <\/p>\n\n\n\n<p>Investors should keep in mind, though, that\nstrong earnings in Q1 2021 and the even stronger growth expected in Q2 are also\nreflective of strong growth in an absolute sense, not just because of low 2020\ncomparisons. The chart below demonstrates how total quarterly earnings in Q1\n2021 far surpassed anything we\u2019ve seen previously, with Q2 2021 (estimated)\nexpected to be +7.3% higher than Q2 2019 (a fairer comparison). <\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/1_pic2-1.png\" alt=\"\" class=\"wp-image-9633\"\/><\/figure>\n\n\n\n<p>Another key bullish factor in the earnings arena\nis earnings estimates, which play an important role in Zacks Investment\nManagement\u2019s stock selection process. We look for strong earnings performance\nin general, but we also look for companies that consistently push earnings\nestimates higher <em>and <\/em>beat their\nestimates a high percentage of the time. Long-term, owning the earnings\ngenerators usually bodes well for total return. <\/p>\n\n\n\n<p>In the chart below, you can see how Q2 2021\nearnings growth estimates have pushed higher over the last several months,\nwhich is a strong signal that CEOs are thinking optimistically about how the\neconomy \u2013 and their businesses \u2013 are likely to perform in the months and the\nyear ahead (chart below).<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/2_pic3.png\" alt=\"\" class=\"wp-image-9634\"\/><\/figure>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/pic4.png\" alt=\"\" class=\"wp-image-9635\"\/><\/figure>\n\n\n\n<p>The bottom line is that the preponderance of\npositive surprises this earnings season \u2013 coupled with corporations raising\nestimates nearly across the board \u2013 is reflecting a genuine improvement in\nunderlying economic fundamentals. But it also speaks to how corporations are\neffectively managing their businesses in the current environment and executing\ntheir company\u2019s strategic and operating plans.&nbsp;There are always plenty of\nfactors to worry about, like inflation and dislocations in the labor market.\nBut from a pure investment standpoint, it is difficult to argue against\nbusiness being good.&nbsp; <\/p>\n\n\n\n<p><strong>Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\n<p>The corporate earnings picture is strong, and\nthe economy is growing at a solid clip. Yet, even still, many want to keep the focus\non what\u2019s <em>wrong or \u2018will be wrong\u2019 <\/em>with\nthe economy: inflationary pressures, rising interest rates, frothy asset\nclasses, and bubbles. <\/p>\n\n\n\n<p>Again, I am not saying any of those factors do\nnot matter \u2013 they all do. But it\u2019s also important to remember the factor that\nmatters most to stock prices \u2013 corporate earnings, in my view \u2013 are in a solid\nplace and likely to get stronger. As the wall of worry continues to grow, just\nremember that corporate earnings are growing too.<\/p>\n\n\n\n<p>In addition to corporate earnings, there are other important data points to keep an eye on. To help you do this, I am offering all readers our&nbsp;<strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_06_07&amp;content=stock_market_outlook_report\">Just-Released June 2021 Stock Market Outlook Report.&nbsp;<\/a><\/strong><\/p>\n\n\n\n<p>This report looks at several factors that are producing optimism right now and contains some of our key forecasts to consider such as: If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<br><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The &#8220;wall of worry&#8221; continues to dominate financial headlines, but earnings are the most important story <\/p>\n","protected":false},"author":3,"featured_media":8874,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-9631","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9631","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=9631"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9631\/revisions"}],"predecessor-version":[{"id":10383,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9631\/revisions\/10383"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9631"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9631"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9631"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}