S&P 500 Earnings Season Update: April 14, 2023

At this very early stage, the first quarter earnings season for the S&P 500 is off to a strong start. Both the number of positive earnings surprises and the magnitude of these earnings surprises are above their 10-year averages. As a result, the index is reporting higher earnings for the first quarter today relative to the end of last week and relative to the end of the quarter. However, the index is still reporting the largest year-over-year decline in earnings since Q2 2020.

Overall, 6% of the companies in the S&P 500 have reported actual results for Q1 2023 to date. Of these companies, 90% have reported actual EPS above estimates, which is above the 5-year average of 77% and above the 10-year average of 73%. In aggregate, companies are reporting earnings that are 7.9% above estimates, which is below the 5-year average of 8.4% but above the 10-year average of 6.4%.

The index is reporting higher earnings for the first quarter today relative to the end of last week and relative to the end of the quarter. The blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings decline for the first quarter is -6.5% today, compared to an earnings decline of -6.9% last week and an earnings decline of -6.7% at the end of the first quarter (March 31).

Positive earnings surprises reported by companies in the Financials sector have been the largest contributor to the decrease in the overall earnings decline for the index over the past week and since March 31.

If -6.5% is the actual decline for the quarter, it will mark the largest earnings decline reported by the index since Q2 2020 (-31.6%). It will also mark the second straight quarter in which the index has reported a decrease in earnings.

Five of the 11 sectors are reporting (or are expected to report) year-over-year earnings growth, led by the Consumer Discretionary and Industrials sectors. On the other hand, six sectors are reporting (or are expected to report) a year-over-year decline in earnings, led by the Materials, Health Care, Information Technology, and Communication Services sectors.

In terms of revenues, 63% of S&P 500 companies have reported actual revenues above estimates, which is below the 5-year average of 69% but equal to the 10-year average of 63%. In aggregate, companies are reporting revenues that are 2.3% above the estimates, which is above the 5-year average of 2.0% and above the 10-year average of 1.3%.

The index is also reporting higher revenues for the first quarter today relative to the end of last week and relative to the end of the quarter. The blended revenue growth rate for the first quarter is 2.0% today, compared to a revenue growth rate of 1.8% last week and a revenue growth rate of 1.9% at the end of the first quarter (March 31).

Positive revenue surprises reported by companies in the Financials sector have been the largest contributor to the increase in the overall revenue growth rate for the index over the past week and since March 31.

If 2.0% is the actual growth rate for the quarter, it will mark the lowest revenue growth rate reported by the index since Q3 2020 (-1.1%). Seven sectors are reporting (or are projected to report) year-over-year growth in revenues, led by the Financials sector. On the other hand, four sectors are reporting (or are predicted to report) a year-over-year decline in revenues, led by the Materials sector.

Looking ahead, analysts still expect earnings growth for the second half of 2023. For Q2 2023, analysts are projecting an earnings decline of -4.6%. For Q3 2023 and Q4 2023, analysts are projecting earnings growth of 1.9% and 8.8%, respectively. For all of CY 2023, analysts predict earnings growth of 0.9%.

The forward 12-month P/E ratio is 18.3, which is below the 5-year average (18.5) but above the 10-year average (17.3). It is also above the forward P/E ratio of 18.1 recorded at the end of the first quarter (March 31), as the price of the index has increased while the forward 12-month EPS estimate has decreased since March 31.

During the upcoming week, 60 S&P 500 companies (including 6 Dow 30 components) are scheduled to report results for the first quarter.

Q1 2023: Scorecard

Q1 2023: Growth

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