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All Eyes on US Q2 Earnings Season

Headline numbers are likely to be dismal, with profits expected to have fallen nearly 45% in Q2. Citi analysts would not be surprised if the actual profits decline is even larger in magnitude, driven by a few outsized losses.


Outright losses are likely in sectors like energy and consumer discretionary while industrials firms are expected to post earnings at around 11% of 2019 levels – an 89% YoY decline.


Nevertheless, economic indicators over the past few months suggest that the worst lockdown effects were likely felt in March and April, with reopenings gradually building in May and June. Citi analysts expect Q2 could mark the low for economic activity and profits, establishing a base that may drive sharp rebounds in percentage terms in the first half of 2021.




The wide divergence in the profits landscape by sector likely reflects the unique reality of this COVID-19 driven recession. While retail sales typically falls during recessions, certain segments like grocery stores and online retailers have benefitted from record-breaking spending growth in April and May.


COVID-19 “Defensives” sectors like IT are likely to demonstrate their resilience to the shutdown. The sector has drawn comparisons to the 1990s tech bubble amid increasing share of the broader market. However, fundamentals continue to justify such lofty market share, as the growing dominance of tech companies in our everyday lives is likely to result in a higher portion of the economy being controlled by these seemingly unstoppable trends.

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