As of January 25, 24% of the companies in the S&P 500 have reported actual earnings and sales numbers for the fourth quarter. Of these companies, 81% have reported sales above estimates and 19% have reported sales below estimates. How does this 81% number compare to recent averages?
During the past year (four quarters), 64% of the companies in the S&P 500 have reported sales above the mean estimate on average. During the past five years (20 quarters), 56% of companies in the S&P 500 have reported sales above the mean estimate on average. Thus, the percentage of companies reporting sales above estimates to date for Q4 2017 is running well above both the trailing one-year average and the trailing five-year average.
If 81% is the final percentage for the quarter, it will mark the highest percentage of companies reporting sales above estimates for a quarter since FactSet began tracking the data in Q3 2008. The current record for the highest percentage for a quarter is 72%, set in Q2 2011.
Seven of the 11 sectors have more than 90% of companies reporting revenues above estimates to date, led by the Energy (100%), Health Care (100%), Real Estate (100%), Telecom Services (100%), and Utilities sectors.
Companies are also beating revenue estimates by wider margins than average for the fourth quarter. In aggregate, companies are reporting actual sales that are 1.1% above expectations. This percentage is above the trailing one- year average (+0.8%) and the trailing five-year average (+0.6%).
At the sector level, the Real Estate (6.6%) and Consumer Discretionary (+3.3%) sectors are reporting the largest upside aggregate differences between actual sales and estimated sales.
It is interesting to note that companies are beating an even higher bar for estimates now relative to expectations at the start of the quarter, as revenue estimates in aggregate actually increased during the fourth quarter. On September 30, the estimated revenue growth rate for Q4 was 5.7%. By December 31, it was 6.7%. Because of the number and magnitude of these upside surprises (and continued upward revisions to revenue estimates after the end of the quarter), the blended revenue growth rate for the quarter has increased to 7.0% today.
Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His 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, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).
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