S&P 500 Could Report Earnings Growth of 19% for Q1

The current earnings growth rate for the S&P 500 for the first quarter is 12.6%, which would mark the 6^th consecutive quarter of double-digit (year-over-year) earnings growth reported by the index. Given that most S&P 500 companies report actual earnings above estimates, what is the likelihood the index will report earnings growth of 12.6% for the quarter?

Based on the average improvement in the earnings growth rate during the earnings season, the index could report earnings growth of 19% for Q1. This would be the highest earnings growth rate reported by the index since Q4 2021 (32.0%).

When companies in the S&P 500 report actual earnings above estimates during an earnings season, the overall earnings growth rate for the index increases because the higher actual EPS numbers replace the lower estimated EPS numbers in the calculation of the growth rate. For example, if a company is projected to report EPS of $1.05 compared to year ago EPS of $1.00, the company is projected to report earnings growth of 5%. If the company reports actual EPS of $1.10 (a $0.05 upside earnings surprise compared to the estimate), the actual earnings growth rate for the company for the quarter is now 10%, five percentage points above the estimated growth rate (5% + 5% = 10%).

In fact, the actual earnings growth rate has exceeded the estimated earnings growth rate at the end of the quarter in 37 of the past 40 quarters for the S&P 500. The only exceptions were Q1 2020, Q3 2022, and Q4 2022.

Over the past ten years, actual earnings reported by S&P 500 companies have exceeded estimated earnings by 7.1% on average. During this same period, 76% of companies in the S&P 500 have reported actual EPS above the mean EPS estimate on average. As a result, from the end of the quarter through the end of the earnings season, the earnings growth rate has increased by 5.8 percentage points on average (over the past ten years) due to the number and magnitude of positive earnings surprises. If this average increase is applied to the estimated earnings growth rate at the end of Q1 (March 31) of 13.2%, the actual earnings growth rate for the quarter would be 19.0% (13.2% + 5.8% = 19.0%).

Over the past five years, actual earnings reported by S&P 500 companies have exceeded estimated earnings by 7.3% on average. During this same period, 78% of companies in the S&P 500 have reported actual EPS above the mean EPS estimate on average. As a result, from the end of the quarter through the end of the earnings season, the earnings growth rate has increased by 7.0 percentage points on average (over the past five years) due to the number and magnitude of positive earnings surprises. If this average increase is applied to the estimated earnings growth rate at the end of Q1 (March 31) of 13.2%, the actual earnings growth rate for the quarter would be 20.2% (13.2% + 7.0% = 20.2%).

Over the past four quarters (Q1 2025 through Q4 2025), actual earnings reported by S&P 500 companies have exceeded estimated earnings by 7.2% on average. During these four quarters, 79% of companies in the S&P 500 reported actual EPS above the mean EPS estimate on average. As a result, from the end of the quarter through the end of the earnings season, the earnings growth rate has increased by 6.1 percentage points on average (during the past four quarters) due to the number and magnitude of positive earnings surprises. If this average increase is applied to the estimated earnings growth rate at the end of Q1 (March 31) of 13.2%, the actual earnings growth rate for the quarter would be 19.3% (13.2% + 6.1% = 19.3%).

Thus, using the most conservative average improvement of these three periods, the index could report year-over-year earnings growth of 19.0% for Q1.

How are the numbers trending to date? Of the 20 S&P 500 companies that have reported actual earnings for Q1 2026 through April 10, 80% have reported actual EPS above the mean EPS estimate. In aggregate, actual earnings reported by these 20 companies have exceeded estimated earnings by 15.7%. However, downward revisions to EPS estimates since the end of the quarter have more than offset these positive EPS surprises to date. As a result, the earnings growth rate for the S&P 500 has decreased by 0.6 percentage points since March 31 (to 12.6% from 13.2%).

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