Earnings Season Update: April 18, 2019

To date, 15% of the companies in the S&P 500 have reported actual results for Q1 2019. In terms of earnings, the percentage of companies reporting actual EPS above estimates (78%) is above the 5-year average. In aggregate, companies are reporting earnings that are 5.7% above the estimates, which is also above the 5-year average. In terms of sales, the percentage of companies (53%) reporting actual sales above estimates is below the 5-year average. In aggregate, companies are reporting sales that are 0.4% above estimates, which is also below the 5-year average.

The blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings decline for the first quarter is -3.9% today, which is smaller than the earnings decline of -4.3% last week. Positive earnings surprises reported by companies in the Financials sector were mainly responsible for the decrease in the overall earnings decline during the week. If -3.9% is the actual decline for the quarter, it will mark the first time the index has reported a year-over-year decline in earnings since Q2 2016 (-3.2%) and it will mark the largest year-over-year decline in earnings since Q1 2016 (-6.9%). Three of the eleven sectors are reporting (or are expected to report) year-over-year growth in earnings, led by the Health Care and Utilities sectors. Eight sectors are reporting a year-over-year decline in earnings. Three of these eight sectors are reporting a double-digit decline in earnings: Energy, Materials, and Information Technology.

The blended revenue growth rate for Q1 2019 is 5.0% today, which is equal to the revenue growth rate of 5.0% last week. If 5.0% is the final growth rate for the quarter, it will mark the lowest revenue growth rate for the index since Q4 2016 (also 5.0%). Ten of the 11 sectors are reporting (or are projected to report) year-over-year growth in revenues, led by the Communication Services and Health Care sectors. The only sector reporting a year-over-year decline in revenues is the Information Technology sector.

Looking at future quarters, analysts expect a slight decline in earnings in the second quarter, low single-digit earnings growth in the third quarter, and high single-digit earnings growth in the fourth quarter.

The forward 12-month P/E ratio is 16.8, which is above the 5-year average and above the 10-year average.

During the upcoming week, 150 S&P 500 companies (including 12 Dow 30 components) are scheduled to report results for the first quarter.