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Earnings Season Update: January 18, 2019

Written by John Butters | Jan 18, 2019

To date, 11% of the companies in the S&P 500 have reported actual results for Q4 2018. In terms of earnings, more companies are reporting actual EPS above estimates (76%) compared to the five-year average. In aggregate, companies are reporting earnings that are 3.2% above the estimates, which is below the five-year average. In terms of sales, fewer companies (56%) are reporting actual sales above estimates compared to the five-year average. In aggregate, companies are reporting sales that are equal to estimates, which is below 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 fourth quarter is 10.6% today, which is slightly above the earnings growth rate of 10.5% last week. Positive earnings surprises reported companies in the Financials sector were mainly responsible for the small increase in the earnings growth rate during the week. If 10.6% is the actual growth rate for the quarter, it will mark the first time the index has not reported earnings growth above 20% since Q4 2017. However, it will also mark the fifth straight quarter of double-digit earnings growth. Ten of the 11 sectors are reporting (or are predicted to report) year-over-year earnings growth. Six sectors are reporting (or are expected to report) double-digit earnings growth, led by the Energy, Industrials, and Communication Services sectors.

The blended, year-over-year revenue growth rate for the fourth quarter is 6.0% today, which is slightly above the revenue growth rate of 5.8% last week. Upward revisions to revenue estimates for companies in the Health Care sector were mainly responsible for the small increase in the revenue growth rate during the week. Ten of the eleven sectors are reporting (or are projected to report) year-over-year growth in revenues. Two sectors are reporting (or are predicted to report) double-digit growth in revenues: Communications Services and Real Estate.

Looking at future quarters, analysts see low, single-digit earnings growth for the first three quarters of 2019.

The forward 12-month P/E ratio is 15.3, which is below the five-year average but above the 10-year average.