|  Data: FactSet; Chart: Thomas Oide/Axios Investors heading into third-quarter earnings season were uneasy. And with good reason — if Q2 was marked by reopening euphoria, Q3 was marked by the Delta variant. What's happening: Companies are pretty much still killing it. There are exceptions of course — but with 23% of third-quarter S&P 500 reports in, the rare earnings misses so far are conspicuous. Why it matters: After the S&P shed more than 5% earlier this month, many wondered if the market was on the cusp of a correction — and if a negative surprise during earnings season could help tip it in that direction. What they're saying: "There were a lot of concerns going into earnings season around supply chain disruptions and how that would impact margins, transportation and energy costs, and labor availability and cost," Grant Bowers, portfolio manager for Franklin Equity Group, tells Axios. - "I think the market is generally a bit relieved at how well companies are dealing with these pressures," he says.
It sure is. The Dow and S&P were back at record highs by the end of last week. By the numbers: So far, 84% of S&P 500 companies have reported better than expected earnings per share, and 75% reported a positive revenue surprise, according to FactSet. - The blended (actual plus estimates) year-over-year earnings growth rate for the S&P is now 32.7%.
State of play: Big companies are winning the margins game. - Average margins across the S&P are tracking at 12.5%, the third-highest on record, FactSet estimates.
- Honeywell, for example, expanded profit margins despite increased labor and materials costs.
- "Honeywell did a really good job taking price wherever they could. They've been aggressive with bringing in inventory and finding alternative sources. And I think that's typical of what we're seeing across the board," Bowers says.
Yes, but: On the flip side, the sector with the most headwinds managing margins: consumer goods. - Consumer staples and consumer discretionary are two of the few sectors experiencing a year-over-year margin contraction, according to FactSet.
- Case in point: Procter & Gamble's profit margin slid 2.6 percentage points as extra costs this quarter were more than expected. "[S]upply chain headwinds will require PG to raise prices and be more efficient to deliver on earnings," Bank of America analysts wrote in a research note.
The bottom line: The overall takeaway so far is that "the headwinds are big, but they're manageable," Bowers says. | 
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