Earnings Season Update 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.

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.

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.