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Why 3Q Earnings May Undershoot Estimates

That has happened just once since 2009, but CFRA’s Stovall expects a re-run.

By Larry Light


The third-quarter earnings season is underway, and it looks as if the results will be good. But maybe not quite as good as analysts predict. Equities guru Sam Stovall warns that the September-ending quarter could end up disappointing.

In fact, the recent three-month period “could become only the second quarter out of the past 49 to see actual results undershoot end-of-quarter estimates,” CFRA’s chief investment strategist writes in a research note. Still, the expected earnings jump is already very high, so a small decline would hardly be a disaster. But, some argue, it could be a harbinger of reduced returns in the future.

Right now, the analysts’ prediction is for a 24.4% year-over-year rise in earnings per share (EPS), per S&P Capital IQ, although Stovall doesn’t put a number on what he thinks the actual outcome will be. At this juncture, the only S&P 500 sectors with anticipated EPS declines are consumer discretionary and utilities.

The reasons for the third-quarter undershoot are the bearish litany we’ve all heard lately: supply chain snarls, wage hikes, and commodity price increases, Stovall reasons. Plus, he points to weakening gross domestic product (GDP) growth estimates and a much softer-than-projected rise in September non-farm payrolls.

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Since the bull market kicked off in early 2009, the benchmark index has logged quarterly EPS growth that exceeded analysts’ expectations in 47 of 48 quarters, missing only in 2020’s pandemic-stricken second period, the CFRA report says. “Will Q3 of 2021 be #48?” Stovall wonders.

Meanwhile, current estimates for next year are more modest than for 2021. The S&P 500 EPS increase is expected to rise just 8.8%, compared with 40.3% for all of calendar 2021, Stovall points out.

Of course, earnings are traditionally the major driver of stock prices. The S&P 500 energy sector has returned the most this year, says Yardeni Research—51.8% as of last Friday. In second place are financials, up 33.9%

“The energy sector is going to experience a windfall in the third quarter” for EPS, CFRA figures. And that, the research note goes on, will be “a welcome change from the small loss in the year-ago quarter.” The propellant: much higher oil prices. Crude finished Monday slightly above $82 per barrel, which is double the level of 12 months ago. Some energy bulls see oil topping $100 in the near future.

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Home > Economy > NY Comptroller Urges $15 Minimum Wage for Restaurant Workers

NY Comptroller Urges $15 Minimum Wage for Restaurant Workers

Many tipped employees are suffering financially, Tom DiNapoli says, and need better pay.

By Larry Light

New York State Comptroller Tom DiNapoli plans to pressure public restaurant companies to pay their workers an hourly minimum wage of $15. 

DiNapoli indicated that the $268.3 billion New York State Common Retirement Fund will urge public companies to raise restaurant workers’ wages to $15, and “follow the lead of these independent restaurant owners” that have already done so. A number of restaurants, especially the large chains, have increased wages in a bid to fill labor shortages. McDonald’s, for instance, has a plan to gradually move pay at company-owned outlets to $15 by 2024.

For much of New York state, the minimum wage already is $15, although not for tipped workers, some of whom have a $10 max in wages, depending on where they live. The federal minimum wage, which serves as a floor for the states, is $7.25, where it has been for the past 12 years. Earlier this year, congressional Democrats’ efforts to raise the minimum to $15 failed.

DiNapoli said recently installed New York Gov. Kathy Hochul has the power, using an executive order, to mandate higher wages in the state.

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The comptroller was slated to unveil this strategy at an event Tuesday morning in New York City. The event includes several organizations dedicated to boosting compensation for workers who survive on a combination of wages and tips: One Fair Wage, RAISE High Road Restaurants, Surdna Foundation, Robert F. Kennedy Human Rights, Interfaith Center on Corporate Responsibility (ICCR), and Adasina Social Capital.

Various small business advocacy groups oppose the effort, saying a $15 requirement would hinder a fragile economic recovery. Workers’ rights organization, on the other hand, contend that the time for $15 is overdue.

A statement about DiNapoli’s event declared: “With reports that a record 4.3 million workers quit their jobs in August, led by food service and restaurant workers, the briefing serves as an opportunity to hear from workers, employers, investors, and policymakers about how subminimum wages are a source of inequity for workers and liability for employers and investors.”

A move to $15, it said, would “alleviate poverty, sustainably grow the economy, and advance gender, racial, disability, and economic justice.”

The One Fair Wage group said that, in addition to restaurant workers, a $15 level would benefit nail salon, parking attendant and airport wheelchair attendant workers, gig workers, workers with disabilities, incarcerated workers, and youth workers. According to the group, 400,000 tipped workers in New York state are subject to a minimum wage that is $4 to $5.50 less than that of non-tipped workers. 

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