At this late stage of the Q3 earnings season for the S&P/TSX Composite, the number of companies reporting a positive earnings surprise is slightly below average while the magnitude of these earnings surprises is well above average. On a year-over-year basis, the S&P/TSX Composite is reporting double-digit (year-over-year) earnings growth for the eighth consecutive quarter.
Overall, 94% of the companies in the S&P/TSX Composite have reported actual results for Q3 2022 to date. Of these companies, 53% have reported actual EPS above estimates, which is slightly below the five-year average of 54%. In aggregate, companies are reporting earnings that are 9.1% above estimates, which is well above the five-year average of -2.1%.
The blended earnings growth rate (combines actual results for companies that have reported and estimated results for companies that have yet to report) for the third quarter is 16.7% today, compared to an earnings growth rate of 20.4% at the end of the third quarter (September 30).
Since September 30, downward revisions to EPS estimates and negative earnings surprises reported by companies in the Materials and Financials sectors have been partially offset by upward revisions to EPS estimates and positive earnings surprises reported by companies in the Energy sector, resulting in an overall decrease in the earnings growth rate for the index during this period.
Despite the decline in the growth rate since the end of the quarter, the index is still reporting double-digit earnings growth for the eighth straight quarter. Six of the eleven sectors are reporting (or have reported) year-over-year earnings growth, led by the Energy and Consumer Staples sectors. On the other hand, five sectors are reporting (or have reported) a year-over-year decline in earnings, led by the Health Care sector.
Looking ahead, analysts expect earnings growth of 5.1% for Q4 2022, and 15.0% for CY 2022. For Q1 2023 and Q2 2023, analysts are projecting earnings declines of -1.8% and -0.7%. For CY 2023, analysts are predicting earnings growth of 3.4%.
The forward 12-month P/E ratio is 12.5, which is below the five-year average (15.0) and below the ten-year average (15.2).
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