Record breaking streak set to roll on after another bumper earnings season

Earnings season hasn’t just met expectations, it has set up markets for a series of new all-time highs - and there may be more to come

As we entered earnings season, investors already signalled high hopes for some of the biggest companies across the market.

With the majority of companies, at least in the US, now having delivered their earnings, we can take heart in the strength of the results unveiled.

A similar story is now unfolding across the ASX as well, and it is giving rise to surging investor sentiment and new records for the local stock market.

Banks, pharma and tech define US earnings

The four largest consumer banks in the US kicked off earnings season with impressive numbers. Each of Bank of America (BAC), JPMorgan Chase (JPM), Citi (C) and Wells Fargo (WFC) topped forecasts. Combined, these names declared US$33 billion in profits, with the US economy rebounding on strong consumer activity.

A year ago, banks feared the worst and made enormous provisions for loan losses. However, these provisions have now been unwound as the economic recovery has fared better than anyone could have anticipated.

Lending activity is also starting to pick up once again, prompting confidence the US can avoid the prospects of a double-dip recession, particularly as the Delta variant spreads across the country.

The Delta variant is also affecting a different segment of the market, with pharma giants such as Pfizer (PFE), Moderna (MRNA) and BioNTech (BNTX) among those leveraged to upside controlling the virus.

Demand for vaccines underpinned significant results for these companies, with billions in sales recorded, and even more locked in for next calendar year.

Revenue is being driven by advance orders for booster shots, with experts now edging towards recommending individuals opt for a third shot for protection.

At the same time, negative sentiment towards the Astrazeneca vaccine, and even Johnson & Johnson’s (JNJ) shot have fuelled demand for the vaccines produced by Pfizer and Moderna.

Numbers from Pfizer (PFE) pointed to US$7.8 billion in COVID vaccine sales in the June quarter alone, while it expects US$33.5 billion across the full year. Moderna has guided for more than US$19 billion in sales for its vaccine shots in 2021.

With results exceeding all expectations, the sector is seeing broad-based money-flow. These names are now at clear all-time highs, while money is flowing into other companies in this segment as biotech becomes ‘hot’ once again.

Elsewhere, mega-tech showcased significant growth numbers yet again. It was another sign of how pivotal this sector is in driving the economic recovery across the US and the rest of the world.

Apple (AAPL) posted US$40 billion in sales across the quarter, with the company seeing strong demand come in not just from local customers in the US, but also from the likes of China and other key geographic markets. Growth is strong across each of its key segments, illustrating the company is seeing traction beyond its flagship iPhones and also across wearables, iPads, software and services.

Amid the boon in remote work and cloud computing, Microsoft (MSFT) is still recording massive growth numbers across its most important divisions. Azure is the clear driver, with 51% growth the best result since Microsoft’s fiscal third-quarter from 2020.

With revenue of US$46.2 billion in the quarter, up 21% versus a year ago, and net income of US$16.5 billion, up 47% versus a year ago, the critical point here is the pace at which the company’s margins are appreciating and contributing to the bottom line.

Meanwhile, Alphabet (GOOGL) and Facebook (FB) are seeing the benefits flow through of a return to digital advertising, particularly as businesses across the country sought to reconnect with customers following the lifting of lockdown measures and other restrictions.

It was a slightly different set of numbers for Amazon (AMZN), with the e-commerce giant seeing its growth moderate somewhat as the economy opened up.

However, the numbers were still indicative of widespread growth, and the reaction to these strong numbers seemed unwarranted given the strength of the company’s most-profitable segment, AWS, which actually accelerated during the quarter and is now contributing a stronger portion to the company’s bottom line.

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