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Earnings Season Update February 22, 2019

Earnings

By John Butters  |  February 22, 2019

To date, 89% of the companies in the S&P 500 have reported actual results for Q4 2018. In terms of earnings, the percentage of companies reporting actual EPS above estimates (69%) is below the five-year average. In aggregate, companies are reporting earnings that are 3.5% above the estimates, which is also below the five-year average. In terms of revenues, the percentage of companies reporting actual revenues above estimates (61%) is slightly above the five-year average. In aggregate, companies are reporting revenues that are 1.1% above the estimates, which is also above the five-year average.

Above In Line Below Estimates

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 13.1% today, which is slightly above the earnings growth rate of 13.0% last week. Positive earnings surprises reported by companies in multiple sectors were responsible for the small increase in the earnings growth rate during the week. If 13.1% 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 for the index. Ten of the 11 sectors are reporting year-over-year earnings growth. Five sectors are reporting double-digit earnings growth, led by the Energy, Communication Services, and Industrials sectors.

Earnings Growth Q4

The blended, year-over-year revenue growth rate for the fourth quarter is 6.6% today, which is below the revenue growth rate of 7.0% last week. Downward revisions to revenue estimates for Berkshire Hathaway were mainly responsible for the decrease in the revenue growth rate during the week. All 11 sectors are reporting year-over-year growth in revenues. Three sectors are reporting double-digit growth in revenues: Communications Services, Real Estate, and Energy.

Looking ahead, analysts predict a decline in earnings for the first quarter (-2.7%) of 2019 and low single-digit growth in earnings for the second (0.7%) and third (2.2%) quarters of 2019.

The forward 12-month P/E ratio is 16.2, which is below the 5-year average but above the 10-year average.

During the upcoming week, 39 S&P 500 companies (including one Dow 30 component) are scheduled to report results for the fourth quarter.

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John Butters

Senior Earnings Analyst

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.