Business Brief

3 things we’ve learned from earnings season, from Big Oil to Big Tech

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The economy has technically been shrinking all year, but what about Wall Street? After the busiest business week of the summer, now more than half of the country’s largest companies have reported second quarter earnings. Here’s what we have learned from them so far.

#1: Big Oil strikes gold

The two largest U.S. oil companies, ExxonMobil and Chevron, both posted record profits in Q2. Together with U.K.’s Shell, BP and France’s TotalEnergies, the fivesome made $59 billion in profits.

Exxon’s $17.9 billion in quarterly profits is actually the most for any international oil major in history, according to Reuters.

“Exxon made more money than God this year,” President Joe Biden said in June.

The president has been harping on Exxon and others this year as drivers paid over $5 per gallon at the pump in Q2, lining the pockets of oil companies.

“They’re not drilling. Why aren’t they drilling? Because they make more money not producing more oil. The price goes up,” Biden added.

He also blasted corporations for using those record profits to buy their own shares. For the five oil and gas majors mentioned, 45% of their record profits will go back to shareholders. Chevron upped its buyback plan to $15 billion for the year, while Exxon said it’s on track for $30 billion in buybacks between 2022 and 2023.

But ExxonMobil said the company has increased Permian Basin production this year to keep up with demand and has made $9.5 billion in capital investments in the first half of 2022.

“If you look at what it takes to bring on new investments to grow supply in the oil industry, it is a fairly long cycle investment,” Exxon CEO Darren Woods said on CNBC.

#2: Digital ad budgets are shrinking, cutting Big Tech

Fears of a recession have companies pulling back on advertising spending, and no one felt it more than Meta, Facebook and Instagram’s parent company. Meta not only missed earnings, it reported its first-ever decline in revenue, down 1% from a year ago.

“We seem to have entered an economic downturn that will have a broad impact on the digital advertising business,” Meta CEO Mark Zuckerberg said.

Twitter, Snap, Alphabet (Google’s parent company), Apple and Microsoft all joined Meta in reporting hits in ad spending.

Roku, meanwhile, said the issue is also spilling into television. Shares plunged 25% after the company badly missed earnings, blaming it on the “significant slowdown in TV advertising” due to the economy.

#3: Results are “better than feared”

That’s what Bank of America strategists said this week after most companies in the S&P 500 have beat estimates on earnings per share, by an average of 3%.

But silver linings come with clouds in this economy. While beating estimates is positive news, FactSet pointed out that it is well below the five-year average of 8.8%. In fact, on a year-over-year basis, the S&P 500 is reporting its lowest earnings growth since Q4 2020.

Bank of America also noted that despite the recent bounce in stocks, this bear market still has room to run. The bank tracks bull market signposts to signal the end of bear markets and said this week that just 30% were signaling that the worst is over for stocks.

SIMONE DEL ROSARIO: THE ECONOMY HAS TECHNICALLY BEEN SHRINKING ALL YEAR, BUT WHAT ABOUT WALL STREET? AFTER THE BUSIEST BUSINESS WEEK OF THE SUMMER, NOW MORE THAN HALF OF THE COUNTRY’S LARGEST COMPANIES HAVE REPORTED SECOND QUARTER EARNINGS. HERE’S WHAT WE’VE LEARNED FROM THEM SO FAR.

NUMBER ONE: BIG OIL STRIKES GOLD.

THE TWO LARGEST U-S OIL COMPANIES, EXXONMOBIL AND CHEVRON, BOTH POSTED RECORD PROFITS IN Q2.

TOGETHER WITH UK’S SHELL, BP AND FRANCE’S TOTALENERGIES, THE FIVESOME MADE $59 BILLION IN PROFITS.

AND REUTERS SAYS EXXON’S $17.9 BILLION IN QUARTERLY PROFITS IS ACTUALLY THE MOST FOR ANY INTERNATIONAL OIL MAJOR IN HISTORY.

PRESIDENT JOE BIDEN: Exxon made more money than God this year.

SIMONE DEL ROSARIO: PRESIDENT BIDEN’S BEEN HARPING ON EXXON AND OTHERS THIS YEAR, AS DRIVERS PAID OVER FIVE DOLLARS A GALLON AT THE PUMP IN Q2, LINING THE POCKETS OF OIL COMPANIES.

PRESIDENT JOE BIDEN: They’re not drilling. Why aren’t they drilling? Because they make more money not producing more oil. The price goes up.

SIMONE DEL ROSARIO: HE ALSO BLASTED THE CORPORATIONS FOR USING THOSE RECORD PROFITS TO BUY THEIR OWN SHARES.

CHEVRON UPPED ITS BUYBACK PLAN TO $15 BILLION FOR THE YEAR, WHILE EXXON SAYS IT’S ON TRACK FOR $30 BILLION IN BUYBACKS BETWEEN THIS YEAR AND NEXT.

BUT EXXONMOBIL SAYS THE COMPANY DID INCREASE PRODUCTION THIS YEAR AND MADE $9.5 BILLION IN CAPITAL INVESTMENTS SO FAR.

EXXONMOBIL CEO DARREN WOODS: if you look at what it takes to bring on new investments to grow supply in the oil industry, it is a fairly long cycle investment.

SIMONE DEL ROSARIO: NUMBER TWO: DIGITAL AD BUDGETS ARE SHRINKING – AND IT’S CUTTING BIG TECH.

FEARS OF A RECESSION HAVE COMPANIES PULLING BACK ON AD SPENDING,

AND NO ONE FELT IT MORE THAN META – FACEBOOK AND INSTAGRAM’S PARENT COMPANY.

META NOT ONLY MISSED EARNINGS, IT REPORTED ITS FIRST EVER DECLINE IN REVENUE, DOWN 1% FROM A YEAR AGO.

CHIEF MARK ZUCKERBERG SAYING, “WE SEEM TO HAVE ENTERED AN ECONOMIC DOWNTURN THAT WILL HAVE A BROAD IMPACT ON THE DIGITAL ADVERTISING BUSINESS.”

TWITTER, SNAP, GOOGLE, ALPHABET, APPLE, MICROSOFT: ALSO REPORTING HITS IN AD SPENDING.

WHILE ROKU SAYS IT’S SPILLING INTO TV – SHARES PLUNGED 25% AFTER THE COMPANY BADLY MISSED EARNINGS, BLAMING IT ON THE “SIGNIFICANT SLOWDOWN IN TV ADVERTISING” DUE TO THE ECONOMY.

AND NUMBER THREE: RESULTS SO FAR ARE QUOTE: “BETTER THAN FEARED.”

THAT’S WHAT BANK OF AMERICA SAID THIS WEEK AFTER MOST COMPANIES IN THE S&P 500 HAVE BEAT ESTIMATES ON EARNINGS PER SHARE. BY AN AVERAGE OF 3%.

BUT, SILVER LININGS COME WITH CLOUDS IN THIS ECONOMY.

AND WHILE THIS IS POSITIVE NEWS, FACTSET POINTS OUT THAT’S WELL BELOW THE FIVE-YEAR AVERAGE OF 8.8%.

IN FACT, ON A YEAR OVER YEAR BASIS, THE S&P 500 IS REPORTING ITS LOWEST EARNINGS GROWTH SINCE Q4 2020.

AND BANK OF AMERICA SAYS, DESPITE THE RECENT BOUNCE IN STOCKS, THIS BEAR MARKET STILL HAS ROOM TO RUN.

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The economy has technically been shrinking all year, but what about Wall Street? After the busiest business week of the summer, now more than half of the country’s largest companies have reported second quarter earnings. Here’s what we have learned from them so far.

#1: Big Oil strikes gold

The two largest U.S. oil companies, ExxonMobil and Chevron, both posted record profits in Q2. Together with U.K.’s Shell, BP and France’s TotalEnergies, the fivesome made $59 billion in profits.

Exxon’s $17.9 billion in quarterly profits is actually the most for any international oil major in history, according to Reuters.

“Exxon made more money than God this year,” President Joe Biden said in June.

The president has been harping on Exxon and others this year as drivers paid over $5 per gallon at the pump in Q2, lining the pockets of oil companies.

“They’re not drilling. Why aren’t they drilling? Because they make more money not producing more oil. The price goes up,” Biden added.

He also blasted corporations for using those record profits to buy their own shares. For the five oil and gas majors mentioned, 45% of their record profits will go back to shareholders. Chevron upped its buyback plan to $15 billion for the year, while Exxon said it’s on track for $30 billion in buybacks between 2022 and 2023.

But ExxonMobil said the company has increased Permian Basin production this year to keep up with demand and has made $9.5 billion in capital investments in the first half of 2022.

“If you look at what it takes to bring on new investments to grow supply in the oil industry, it is a fairly long cycle investment,” Exxon CEO Darren Woods said on CNBC.

#2: Digital ad budgets are shrinking, cutting Big Tech

Fears of a recession have companies pulling back on advertising spending, and no one felt it more than Meta, Facebook and Instagram’s parent company. Meta not only missed earnings, it reported its first-ever decline in revenue, down 1% from a year ago.

“We seem to have entered an economic downturn that will have a broad impact on the digital advertising business,” Meta CEO Mark Zuckerberg said.

Twitter, Snap, Alphabet (Google’s parent company), Apple and Microsoft all joined Meta in reporting hits in ad spending.

Roku, meanwhile, said the issue is also spilling into television. Shares plunged 25% after the company badly missed earnings, blaming it on the “significant slowdown in TV advertising” due to the economy.

#3: Results are “better than feared”

That’s what Bank of America strategists said this week after most companies in the S&P 500 have beat estimates on earnings per share, by an average of 3%.

But silver linings come with clouds in this economy. While beating estimates is positive news, FactSet pointed out that it is well below the five-year average of 8.8%. In fact, on a year-over-year basis, the S&P 500 is reporting its lowest earnings growth since Q4 2020.

Bank of America also noted that despite the recent bounce in stocks, this bear market still has room to run. The bank tracks bull market signposts to signal the end of bear markets and said this week that just 30% were signaling that the worst is over for stocks.

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