As of today, more than 99% of the companies in the S&P 500 have reported actual earnings numbers for the second quarter. Of these companies, 80% reported actual EPS above the mean EPS estimate, 5% reported actual EPS equal to the mean EPS estimate, and 16% reported actual EPS below the mean EPS estimate (the percentages do not add to 100% due to rounding). How does this 80% positive surprise number compare to recent quarters?
During the past year (four quarters), 75% of the companies in the S&P 500 have reported EPS above the mean estimate on average. During the past five years (20 quarters), 70% of companies in the S&P 500 have reported EPS above the mean estimate on average. Thus, the percentage of companies that reported EPS above estimates for Q2 2018 was above both the trailing one-year average and the trailing and five-year average.
In fact, the second quarter marked the highest percentage of companies reporting EPS above estimates for a quarter since FactSet began tracking the data in Q3 2008. The previous record for the highest percentage for a quarter was 78%, set in in the prior quarter (Q1 2018).
At the sector level, the Telecom Services (100%), Health Care (94%), and Information Technology (90%) sectors had the highest percentages of companies reporting EPS above estimates. In seven of the 11 sectors, more than 80% of companies reported a positive EPS surprise.
It is important to note that S&P 500 companies did not beat EPS estimates that had been drastically lowered coming into the second quarter earnings season. Aggregate earnings for the second quarter actually increased by the second largest percentage in seven years during the second quarter.
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.