Due to the severe impact on the global economy, US corporate profits generally fell in the second quarter. Fortunately, the results released by the end of July showed that most companies' earnings per share (EPS) and revenue beat market expectations. Meanwhile, analysts rarely raised their forecasts for the third quarter in July.

As of July 31, 56.9% of the 313 S & P 500 companies that had reported results beat market expectations in terms of EPS and revenue, according to Zacks Investment Research.

After public health incidents hit corporate profitability, analysts downgraded their earnings estimates ahead of the earnings season, making it easy to exceed expectations. Judging from the performance of the results, the impact on corporate profits does not seem to be as serious as analysts expected.

The total profit (or total net income) of the 313 companies fell 36.2% year-on-year, while revenue fell 7.8%. Of these, 79.9% of companies' EPS beat market expectations, while 65.2% of companies had better-than-expected revenue.

In the first month of the third quarter, analysts also made an unusual move: raising earnings estimates.

Analysts tracking the S & P 500 raised their third-quarter EPS forecast by 1.1 percent in July, according to Factset. Although the range looks small, historically, analysts have usually lowered their forecasts during this period.

Factset's John Butters said: "over the past five years (20 quarters), bottom-up EPS forecasts an average decline of 2.8 percent in the first month of the quarter. Over the past 15 years, the average decline has been 2.4 percentage points. "

The increase in earnings estimates for the third quarter is only the third in nine years. The previous two quarterly EPS forecasts were raised in the first month of the current quarter in the first quarter of 2018 (+ 4.9%) and in the second quarter of 2011 (+ 2.1%).

Zacks's Sheraz Mian points out that market forecasts for third-quarter earnings growth for the S & P 500 have been rising steadily since early July, with a similar trend for the fourth quarter of 2020 and for the whole of the year. The market now expects S & P 500 earnings to fall 24.3% in the third quarter from a year earlier.

The better-than-expected results and analysts raised their forecasts for the next two quarters are good news for investors. Since the earnings season began in mid-July, the s & p 500 is up nearly 4%, just 3.4% from its all-time closing high in February.

It is worth mentioning that tech companies, the driving force behind the S & P 500's rally, reported a 1.8% drop in total profits in the second quarter, while revenue growth of 2.5% led to 90.2% growth in EPS and 80.5% in revenue that beat expectations.

On July 30th, the four largest US technology stocks, Apple Inc, Amazon.Com Inc (AMZN.US), Google parent company Alphabet (GOOGL.US) and FB.US (Facebook), released their latest results in after-hours trading, all of which beat market expectations.

However, analysts cautioned that while the increase in earnings estimates helped boost confidence, the basis of these earnings estimates was fragile given that the US unemployment rate remained in double digits and the economic recovery faced great uncertainty.