Earnings Season Thus Far

It became clear last week that earnings season is upon us, with several key stocks reporting.  This week promises to be even more consequential, with the largest amount of S&P 500 companies reporting – including four of the “Mag 7” stocks.  We ran some numbers to see how the market has been responding thus far.

From July 1^st through Friday, July 25^th, 150 of the S&P 500 (SPX) constituents have reported their earnings.  That constitutes exactly 30% of the index components.  Yet when we calculated the approximate index weights of the companies that have reported thus far, we found that their cumulative weights only comprise about 27.5% of the index.  An exercise of this sort reminded me just how top-heavy the index is.  That is an important consideration when four of the five largest index components, comprising just under 20% of SPX’ weight, release earnings this week.  They are of course Microsoft (MSFT, #2), Apple (AAPL, #3), Amazon (AMZN, #4), and Meta Platforms (META, #6).  (Nvidia (NVDA, #1) reports in about a month and Alphabet (GOOG, GOOGL, combined #5) reported last week)

For further perspective, the arithmetic average of the index weights of the companies that reported since July 1^st is about .183%, but the median is 0.09%.  That means that 75 of the 150 companies in the analysis have index weights of 0.09% or less. For perspective, the weights of the largest companies to report this month are GOOG+GOOGL at 3.75%, Tesla (TSLA) at 1.63%, and JPMorgan Chase (JPM) at 1.53%.  This is why we calculated weighted averages after doing the first pass on the raw numbers.

We always hear how some huge majority of stocks reported better than expected earnings.  It’s not really news when 75-85% of companies beat their published consensus estimates in any given quarter.  It says as much about how well companies manage their analysts as much as it does about how well they manage their businesses.

As a result, we focused upon the market’s reaction instead.  We used the post-earnings moves – later that day for morning releases, the next-day for afternoon releases – as the basis for comparison.

The raw numbers say that the results so far are pretty good.  Of the 150 companies in the survey, 83 of them, or 55.3%, rose after they reported earnings.  The average move was +0.42%, with a median of +0.935%.  Not bad at all.

The values changed when we adjusted for each company’s weight in SPX.  The average post-earnings move reverted to a slight loss of -0.087%, though the median was still positive at 0.053%. 

This bears watching. My interpretation is that the more heavily scrutinized the company, the higher the unstated expectations – the “whisper numbers”, so to speak.  Think about the market’s reaction to GOOGL earnings.  They beat on every measure, yet the stock only rose about 1%.  Meanwhile, a whole bunch of relatively obscure stocks – at least to average investors – did quite well after positive surprises.  The bar is higher for the most highly valued companies – something to keep in mind ahead of this week’s key results. 

Post-earnings Results of SPX Companies Reporting June 1-25, 2025

Source: Interactive Brokers, Bloomberg