S&P 500 Earnings Season Update: August 4, 2023

At this late stage of the Q2 earnings season for the S&P 500, both the number of companies reporting 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 second quarter today relative to the end of last week and relative to the end of the quarter. However, the index is also reporting its largest year-over-year decline in earnings since Q3 2020.

Overall, 84% of the companies in the S&P 500 have reported actual results for Q2 2023 to date. Of these companies, 79% have reported actual EPS above estimates, which is above the 5-year average of 77% and above the 10-year average of 73%. This number also marks the highest percentage of S&P 500 companies reporting a positive EPS surprise since Q3 2021 (82%). In aggregate, companies are reporting earnings that are 7.2% above estimates, which is below the 5-year average of 8.4% but above the 10-year average of 6.4%.

During the past week, positive earnings surprises reported by companies in multiple sectors (led by the Consumer Discretionary, Health Care, and Information Technology sectors) were responsible for the decrease in the overall earnings decline for the index over this period. Since June 30, positive earnings surprises reported by companies in multiple sectors (led by the Consumer Discretionary and Information Technology sectors), partially offset by downward revisions to EPS estimates for a company in the Health Care sector, have been responsible for the decrease in the earnings decline for the index during this period.

As a result, the index is reporting higher earnings for the second 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), year-over-year earnings decline for the second quarter is -5.2% today, compared to an earnings decline of -7.4% last week and an earnings decline of -7.0% at the end of the second quarter (June 30).

If -5.2% is the actual decline for the quarter, it will mark the largest year-over-year earnings decline reported by the index since Q3 2020 (-5.7%). It will also mark the third straight quarter in which the index has reported a year-over-year decrease in earnings.

Eight of the eleven sectors are reporting year-over-year earnings growth, led by the Consumer Discretionary and Communication Services sectors. On the other hand, three sectors are reporting a year-over-year decline in earnings: Energy, Materials, and Health Care.

In terms of revenues, 65% of S&P 500 companies have reported actual revenues above estimates, which is below the 5-year average of 69% but above the 10-year average of 63%. In aggregate, companies are reporting revenues that are 1.6% above the estimates, which is below the 5-year average of 2.0% but above the 10-year average of 1.3%.

During the past week, positive revenue surprises reported by companies in multiple sectors (led by the Health Care sector) were responsible for the increase in overall revenues for the index over this period. Since June 30, positive revenue surprises reported by S&P 500 companies in multiple sectors (led by the Health Care and Consumer Discretionary sectors), partially offset by downward revisions to revenue estimates for companies in the Energy sector, have been responsible for the increase in revenues for the index during this period.

As a result, the index is reporting higher revenues for the second quarter today relative to the end of last week and relative to the end of the quarter. The blended (year-over-year) revenue growth rate for the second quarter is 0.6% today, compared to a revenue growth rate of 0.1% last week and a revenue decline of -0.4% at the end of the second quarter (June 30).

If 0.6% is the actual growth rate for the quarter, it will mark the lowest year-over-year revenue growth rate reported by the index since Q3 2020 (-1.1%).

Seven sectors are reporting year-over-year growth in revenues, led by the Consumer Discretionary and Financials sectors. On the other hand, four sectors are reporting a year-over-year decline in revenues, led by the Energy and Materials sectors.

Looking ahead, analysts still expect earnings growth for the second half of 2023. For Q3 2023 and Q4 2023, analysts are projecting earnings growth of 0.2% and 7.6%, respectively. For all of CY 2023, analysts predict earnings growth of 0.8%.

The forward 12-month P/E ratio is 19.2, which is above the 5-year average (18.6) and above the 10-year average (17.4). It is also slightly above the forward P/E ratio of 19.1 recorded at the end of the second quarter (June 30).

During the upcoming week, 34 S&P 500 companies (including one Dow 30 component) are scheduled to report results for the second quarter.

The FactSet Earnings Insight report will not be published on August 11, August 18, and August 25. The next edition of the report will be published on September 1.

Q2 2023: Scorecard

Q2 2023: Growth

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