The blended (combines actual results for companies that have reported and estimated results for companies yet to report) earnings growth rate for the S&P 500 for the first quarter is 12.5% as of today. This growth rate is above the estimated earnings growth rate of 9.0% at the end of the quarter (March 31) and equal to the estimated earnings growth rate of 12.5% at the start of the quarter (December 31, 2016).
If 12.5% is the actual growth rate for the first quarter, it will mark the highest (year-over-year) earnings growth for the index since Q3 2011 (16.7%), and it will mark the first time the index has seen (year-over-year) double-digit earnings growth since Q4 2011 (11.6%).
What is driving the increase in the earnings growth rate since March 31? In aggregate, upside revisions to earnings estimates and upside earnings surprises reported by S&P 500 companies have led to an $8.5 billion increase in earnings for the index since March 31 (as higher actual earnings replace estimated earnings in the growth rate calculation). Five sectors account for $7.5 billion (or 88%) of this $8.5 billion increase in earnings since March 31: Industrials, Financials, Health Care, Information Technology, and Consumer Discretionary.
Of these five sectors, the Industrials and Financials sectors have been the largest contributors to the rise in earnings growth for the index since the end of the quarter. These two sectors account for $3.7 billion (or 44%) of the $8.5 billion increase in earnings for the S&P 500 since March 31. The upside earnings surprises reported by Bank of America ($0.41 vs. $0.35), JPMorgan Chase ($1.65 vs. $1.51), Caterpillar ($1.28 vs. $0.63), General Electric ($0.21 vs. $0.17), and Morgan Stanley ($1.07 vs. $0.89) were all substantial contributors to the increase in earnings growth for the index during this time.
John’s weekly research report, Earnings Insight provides analysis and commentary on trends in corporate earnings data for the S&P 500, including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, Financial Times, The New York Times, MarketWatch, and Yahoo! Finance.