Market Insights | US Reporting Season Q2 2023

By Cornelius Zeeman,
Fairtree Portfolio Manager

Market reaction to US company earnings.


As we delve into the current US reporting season, 423 of companies have already reported their earnings. Despite approximately 80% of these companies surpassing earnings estimates, the market has shown a muted response. On average, the earnings surprise, weighted by market capitalisation, stands at an encouraging 6%, with notable outperformance in sectors like Consumer Staples and IT (see graphs below).

Graph 1: Information Technology & Consumer Staples delivering biggest beats so far.
EPS beats as % of total reported (%)

Source: Fairtree, HSBC

Graph 2: Market cap weighted EPS surprise in Q2 2023 (%)

Source: Fairtree, HSBC

However, the question arises: Why hasn’t the market reacted more favourably to this positive trend? The answer lies in the fact that although companies have beaten expectations, the overall earnings per share (EPS) for S&P 500 Index is still negatively tracking year-on-year due to beaten down expectations.

Graph 3: Sectors Consensus EPS growth in 2Q 2023 YoY (%)

Source: Fairtree, HSBC

Insights: Amazon expectations managed & EPS beats.


Amazon was one of the big winners of reporting season, with the share jumping 9% last week. Results came in significantly ahead of consensus (dots vs lines). Interestingly, the actual adjusted earnings (grey) only came in marginally ahead of expectations 15 months ago before downgrades rolled in. In the case of GAAP EPS (orange), the $0.63 is still well below the $1.16 consensus expected two years ago – this is a typical phenomenon in the USA, where management guides down numbers to lower the hurdle for them to beat expectations.

Graph 4: Amazon | Actual Adjusted EPS vs GAAP- & Adjusted Consensus EPS

Source: Fairtree, Bloomberg

The key reason for the earnings beat was the encouraging performance of their E-commerce business. North America is back to a normal operating margin of ~4%, while the international segment has continued to narrow its losses.

Graph 5: Amazon Retail Operating Margins

Source: Fairtree, Bloomberg

Other positive elements of the result are the continued decrease in Capex relative to Revenues and the stabilisation of AWS (cloud business) revenue growth in constant currency. Negatives include the continued increase of Stock-based compensation in absolute and relative terms. This is an interesting topic for future discussion.


This article is based on available data and does not constitute financial advice. Investors should conduct their own research and consult with a financial advisor before making any investment decisions.

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