According to research from BofA Securities, corporate earnings and sales have beat expectations more than originally anticipated by approximately 10.2% and 1.9%, respectively. Data on S&P 500 companies from FactSet indicated that 84% of companies have reported a positive earnings per share (EPS) and 69% reported revenue surprises with approximately 63% of companies having reported actual results as of July 31, 2020. The underlying theme of this quarter’s earnings is that S&P 500 companies have generally performed better than expected as many viewed Q2 as possibly having the worst performance for 2020 due to shutdowns and shelter in place orders. Many firms appear to have a better sense of planning and forecasting business performance given the macroeconomic outlook and containment measures associated with COVID-19 and have even provided financial guidance for the remainder of 2020. Sectors such as Technology and Consumer Staples performed well, given work from home mandates and restricted mobility. As employees continue working remotely and staying at home, both sectors should continue to benefit over the near term given the need for cloud computing and increased consumption of home and personal care items. 

The Consumer Discretionary and Energy sector environment is expected to remain challenged. Non-essential business closures (and partial closures) across the country as well as the depressed demand for travel nationwide will further hinder operations. Tailored Brands Inc. (owner of Men’s Wearhouse and Jos. A. Bank) and Lord & Taylor are two of the most recent casualties of COVID-19, both filing for bankruptcy protection as lockdowns have decimated demand on clothing apparel chains and department stores. Other industries, such as pharmaceuticals, have remained relatively insulated from the current health crisis, notably due to the inherent nature and stable demand for drug therapies and vaccines. This coming week, 129 S&P 500 companies are expected to report quarterly earnings.