S&P 500 EARNINGS SEASON UPDATE: OCTOBER 26, 2018 COMPANIES AND EARNINGS ByJohn Butters | October 26, 2018 To date, 48% of the companies in the S&P 500 have reported actual results for Q3. Companies are outperforming recent averages on the earnings side and performing in line with recent averages on the revenue side. In terms of earnings, the percentage of companies reporting actual EPS above estimates (77%) is above the five-year average. In aggregate, companies are reporting earnings that are 6.5% above the estimates, which is also above the five-year average. In terms of sales, the percentage of companies reporting sales above estimates (59%) is equal to the five-year average. In aggregate, companies are reporting sales that are 0.8% above estimates, which is slightly above the five-year average. The blended (combines actual results for companies that have reported and estimated results for companies that have yet to report), year-over-year earnings growth rate for the third quarter is 22.5% today, which is above the earnings growth rate of 19.4% last week. Positive earnings surprises reported by companies in multiple sectors (led by the Information Technology, Communication Services, and Consumer Discretionary sectors) were responsible for the increase in the overall earnings growth rate during the week. If 22.5% is the actual growth rate for the quarter, it will mark the third highest earnings growth since Q3 2010. All 11 sectors are reporting year-over-year earnings growth. Eight sectors are reporting double-digit earnings growth, led by the Energy, Financials, Communication Services, and Materials sectors. The blended, year-over-year sales growth rate for the third quarter is 7.6% today, which is above the sales growth rate of 7.4% last week. Positive revenue surprises reported by companies in multiple sectors were responsible for the slight increase in the overall revenue growth rate during the week. All 11 sectors are reporting year-over-year growth in revenues. Three sectors are reporting double-digit growth in revenues: Energy, Communication Services, and Real Estate. Looking at future quarters, analysts see double-digit earnings growth for the fourth quarter, but also see single-digit earnings growth for the first half of 2019. The forward 12-month P/E ratio is 15.5, which is below the five-year average but above the 10-year average. During the upcoming week, 139 S&P 500 companies (including six Dow 30 components) are scheduled to report results for the third quarter. https://insight.factset.com/sp-500-earnings-season-update-october-26-2018
S&P 500 COMPANIES SEE WORST PRICE REACTION TO POSITIVE EPS SURPRISES SINCE Q2 2011 COMPANIES AND EARNINGS ByJohn Butters | October 29, 2018 To date, almost half (48%) of the companies in the S&P 500 have reported earnings for the third quarter. Of these companies, 77% have reported actual EPS above the mean EPS estimate, which is above the five-year average of 71%. In aggregate, earnings have exceeded expectations by 6.5%, which is above the five-year average of 4.6%. Due to these positive EPS surprises, the earnings growth rate for the S&P 500 has improved to 22.5% today from 19.3% on September 30. Given the strong performance of actual earnings relative to analyst estimates and the improvement in the earnings growth rate over the past few weeks, how has the market responded to positive EPS surprises during the Q3 earnings season? Companies in the S&P 500 that reported positive earnings surprises for Q3 have seen a decrease in price of 1.5% on average from two days before the company reported actual results through two days after the company reported actual results. Over the past five years, companies in the S&P 500 that have reported positive earnings surprises have witnessed a 1.0% increase in price on average during this four-day window. If the final percentage for the quarter is -1.5%, it will mark the largest average price decline over this 4-day window for S&P 500 companies reporting positive EPS surprises since Q2 2011 (-2.1%). Why Is The Market Punishing Companies That Reported Positive Earnings Surprises? It is likely not due to EPS guidance or analyst revisions to EPS estimates for the fourth quarter. To date, 63% (26 of 41) of the companies that have issued EPS guidance for Q4 have issued negative guidance. This percentage is below the 5-year average of 70%. In aggregate, analysts have made smaller cuts than average to fourth quarter EPS estimates during the month of October (with five days remaining in the month).
COMPANIES AND EARNINGS ByJohn Butters | November 5, 2018 During the month of October, analysts lowered earnings estimates for companies in the S&P 500 for the fourth quarter. The Q4 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for all the companies in the index) dropped by 1.1% (to $42.11 from $42.56) during this period. How significant is a 1.1% decline in the bottom-up EPS estimate during the first month of a quarter? How does this decrease compare to recent quarters? During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 1.6%. During the past ten years (40 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 2.1%. During the past fifteen years (60 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 1.6%. Thus, the decline in the bottom-up EPS estimate recorded during the first month of the fourth quarter was smaller than the five-year, 10-year, and 15-year averages. Sector-Level Breakdown At the sector level, nine sectors recorded a decline in their bottom-up EPS estimate during the first month of the quarter, led by the Utilities (-4.4%) and Industrials (-4.1%) sectors. On the other hand, the Energy (+5.4%) sector was the only sector that recorded an increase in its bottom-up EPS estimate during this time. The Information Technology (0.0%) sector saw no change in its bottom-up EPS estimate during this period. Overall, five sectors recorded a smaller decrease (or an increase) in their bottom-up EPS estimate relative to their 10-year average and their 15-year average for the first month of a quarter. As the bottom-up EPS estimate for the index declined during the first month of the fourth quarter, the value of the S&P 500 also decreased during this same period. From September 30 through October 31, the value of the index decreased by 6.9% (to 2711.74 from 2913.98). The fourth quarter marked the sixth time in the past 20 quarters in which the both the bottom-up EPS estimate and the value of the index decreased during the first month of the quarter. Post Comment