S&P 500 Earnings Season Update: October 19, 2018

For Q3 2018 (with 17% of the companies in the S&P 500 reporting actual results to date), more companies are beating estimates than average, but the magnitude of the beats is smaller than average. In terms of earnings, more companies are reporting actual EPS above estimates (80%) compared to the five-year average. In aggregate, companies are reporting earnings that are 3.9% above the estimates, which is below the five-year average. In terms of sales, more companies (64%) are reporting actual sales above estimates compared to the five-year average. In aggregate, companies are reporting sales that are 0.5% above 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 third quarter is 19.5% today, which is above the earnings growth rate of 18.9% last week. Positive earnings surprises reported by companies in the Financials sector were mainly responsible for the increase in the overall earnings growth rate during the week. If 19.5% is the actual growth rate for the quarter, it will tie the mark for the third highest earnings growth since Q1 2011 (also 19.5%). All 11 sectors are reporting (or are predicted to report) year-over-year earnings growth. Seven sectors are reporting double-digit earnings growth, led by the Energy, Financials, and Materials sectors.

The blended, year-over-year sales growth rate for the third quarter is 7.4% today, which is above the sales growth rate of 7.3% 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 (or are projected to report) year-over-year growth in revenues. Three sectors are reporting double-digit growth in revenues: Energy, Communication Services, and Real Estate.

2018 and Beyond

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 15.9, which is below the five-year average but above the 10-year average.

During the upcoming week, 158 S&P 500 companies (including 10 Dow 30 components) are scheduled to report results for the third quarter.