In this episode we get into the topic of earnings calls. And while it is something we have talked about in the past, this quarter has a little different feeling behind it. We jump into what we are looking for, what may show, and where it may lead us as investors.
In this episode we get into the topic of earnings calls. And while it is something we have talked about in the past, this quarter has a little different feeling behind it. We jump into what we are looking for, what may show, and where it may lead us as investors.
Hey guys, what is going on? Welcome to another episode of The Life finance in between podcast I'm Eddie Thomas brought to by wealth management services in Hershey, Pennsylvania. And today, we're talking about earnings season. Once again, I talked about it on the past earnings season is pretty much obviously every time a quarters up, companies come out talk about how they did in this last quarter, they beat on revenue if they'd been on sales, and every company is different. And I've talked about how I think the typically the reaction is overdone, in my mind my opinion, one way or the other, meaning when a company does well, they tend to be praised, probably maybe a little bit more than they should sometimes. And really to the downside when a company doesn't do well, they get out a lot of times, not a lot of times, but sometimes they get absolutely crushed. And on Netflix missed on subscribers, they got crushed one time at a miss they got crushed, like investors just overreact one way or the other. I've said it before three months doesn't tell the whole story of a company. And it certainly doesn't any year like 2022. So I'm not quite sure why people will react. But with saying that moving into the third quarter earnings season that we're about to through ncimb, like sometime and beginning of October, I think this week or next. And then leading into all the way to like middle of November, by the time the last reports come out. It's actually a really interesting earnings season that I'll be paying attention to a little bit more than I might normally, I normally keep my finger on the pulse. But I never really dive deep, deep bit into it. But this this one I might and there's there's a reason why. And the reason the biggest reason why I think this earnings season is going to be much more of a look under the hood as to what the end of 2022 might bring us is because it's going to be the the next in the best glance, we get to look to see how consumers have done with nine months now of high inflation in their everyday lives. And why does that matter? Well, the last decade or so, pretty much from 2010. To end of 21 Take out a few months here, there and 2018 to 2020, the consumer has proven to be incredibly strong, spending a ton of money, doing incredibly well. And in turn spending their money companies and companies do well on when companies do well the economy grows. So it's been in that cycle for the last decade to 12 years where it's been consumers are strong. So companies are strong because they're selling to consumers. And in turn, the economy's strong, because companies are doing well because consumers are doing well. And it's even kind of lasted through the first half of this year, when we had a ton of extra money on the side as consumers. We had a bunch of savings and we didn't really know what to do with it. You were locked up for two years during COVID. So you went out and you just spent we just spent money, whether it was Apple or Microsoft or Louis Vuitton bags, or you name it gas, groceries, restaurants, you name it, people are spending money at it. And that was for the first six months of the of the year, because people had a ton of savings from 2020 when you couldn't really do anything 2021 It was kind of touching go you can go sometimes other times things are close. Are we open? Are we not? And this year was the first year where it kind of felt like okay, everyone's back to normal, we're going to spend our money like we haven't been able to the last two years, let alone we've had a bunch of stimulus in the meantime, given us extra money as well. So go through the first six months of the year. And companies are still proving to be pretty well, I mean, doing pretty well, because consumers are still spending money. So companies are still hitting their sales quotas. And because of that they're they're doing well in the the earnings side of things. Now we have the next last three months. And I'm curious to see and again, this is why this earnings call these earnings calls, I'll be more in tune to them is because I'm curious to see how companies continue to do now with the last three months, maybe potentially the consumer being a little bit more strained because of continuous inflation. And the kind of strain that that puts on people, when gas cost more significant significantly more over a longer time when groceries cost significantly more over a longer time. And those prices were coming down for a little bit. But you still had the eight, the nine months before that, that it was it was elevated. And that takes its toll. So that's really what it comes down to. I'm very very curious to see how the consumer is holding up in this inflationary environment. And if they're holding up well and continuing to spend money, then you'll see that in companies earnings reports and calls. When they say the consumer has done well. We've continued to sell a bunch of stuff, product or service And because of that our company has done well in the past three months. Or it's going to come where the company is say the consumer is showing that they're cutting costs here, they're or they're just not spending as much in general. And we have been impacted by that by not selling as much products and services. Now, if the consumer has remained resilient, and has continued to spend money at these companies, we're going to see the market. I don't know, I can't tell you what the market is going to do. But it's good news that the consumer has continued to do well, for the last nine months. We'll see what the next three months kind of have in store at that point, because we'll still have elevated inflation. And we'll still have these companies trying to operate in this weird world of spending more money and operations, not trying to pass all the expenses to the consumer, and kind of see what the next three months has in store. If the consumer shows that they're wavering, I think that's where we kind of have to pay a little bit more attention as to what companies are wavering on and why if someone like Apple comes out and says, Hey, we have not sold as many iPhones, as many laptops, that's because the consumer one has spent a ton on on products like that have spent more on services this year, because they haven't been able to take vacations. And they're not things that you buy pretty much year over year, quarter after quarter. So if that happens, it's the shifting of the consumer, if their staple brands like grocery stores and retailers that say, Hey, we were seeing a consumer not spend as much money. That's where it gets a little bit more to the point where you're, you're asking, Okay, are we not spending money? Because we're cutting costs? Or are we spending money because we just aren't as comfortable doing so at the moment with how high prices are? And those conversations are polar opposite. But I'd be curious to see how each one of them goes. I'm not quite sure where the consumer is going to show the strength and what capacity that'll be at. But that's pretty much what we're looking for, is the consumer strong and spending money? Or is the consumer not strong and spending money or spending less money? And how does that impact companies in the last three months. And then the next thing we're looking for good or bad, is what our company is projecting, going into the next three months, because we have a midterm coming up in a month, we have elevate inflation still being a case, and we but we have holiday season coming up as well, when these companies tend to sell much more than they would have. So I'm curious to see how companies are operating in this inflationary period. And with supply chain constraints that car manufacturers are still seeing cell phone and other user kind of items are still seeing. I'm curious to see how they navigate inflation, the holidays, supply, constraints, and a few other factors, that even if the consumer remains strong, can the businesses remain strong in the next three months and continue to operate efficiently. So that's kind of where we're at long term, everything's going to be fine. Even if the consumer shows a little wavering of strength this quarter, it's going to be fine, long term, it's not the end of the world, the consumer will will find strength again, when inflation comes down. And companies will continue to do well and the economy will continue to grow. If the consumer shows that they're wavering a bit, it really comes down to inflation. And just because wage growth has been phenomenal. And wage growth is is going to stay around, it's just bringing down inflation from 8%, back to five to four to three to 2% that we want. That will give us another kind of spark into the consumer and economic growth and business growth. But we just got to get to that point first. So that's really what we're looking for this guy this time around, we're looking for that that consumer growth and that company growth and we're gonna see if the consumers wavering if companies are wavering and it'll give us a good look under the hood as to what to expect for the next three months or so to round out the end of 22. So I'll be paying a little bit more attention to this to this earning season. And then next but mostly this one, so Alright, that's it for today, guys. Until the next one, stay happy, stay healthy, and I'll see you. Securities offered through securities America Inc. Member FINRA slash SIPC. advisory services offered through securities America advisors Inc. Wealth Management Services and securities America are separate entities. The opinions and forecasts expressed are those of the author and may not actually come to pass. 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