At this stage of the Q4 earnings season, the overall performance of the S&P 500 relative to earnings estimates continues to improve. The percentage of S&P 500 companies reporting positive earnings surprises is now above the 10-year average, while the magnitude of earnings surprises is still below the 10-year average. However, both metrics are above the numbers from last week. As a result, the index is reporting higher earnings for the fourth quarter today relative to the end of last week and relative to the end of the quarter. On a year-over-year basis, the index is reporting earnings growth for the second consecutive quarter.
Overall, 67% of the companies in the S&P 500 have reported actual results for Q4 2023 to date. Of these companies, 75% have reported actual EPS above estimates, which is below the 5-year average of 77% but above the 10-year average of 74%. It is also above last week’s number of 72%. In aggregate, companies are reporting earnings that are 3.8% above estimates, which is below the 5-year average of 8.5% and below the 10-year average of 6.7%. However, it is also above last week’s number of 2.6%. Historical averages reflect actual results from all 500 companies, not the actual results from the percentage of companies that have reported through this point in time.
As a result, the index is reporting higher earnings for the fourth 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 growth rate for the fourth quarter is 2.9% today, compared to an earnings growth rate of 1.6% last week and an earnings growth rate of 1.5% at the end of the fourth quarter (December 31).
Positive earnings surprises reported by companies in multiple sectors (led by the Financials and Industrials sectors) were the largest contributors to the increase in overall earnings for the index during the past week. Positive earnings surprises reported by companies in multiple sectors (led by the Information Technology, Industrials, Consumer Discretionary, and Health Care sectors), partially offset by negative earnings surprises reported by companies in the Financials sector, have been the largest contributors to the increase in overall earnings for the index since the end of the quarter.
If 2.9% is the actual growth rate for the quarter, it will mark the second consecutive quarter that the index has reported year-over-year growth in earnings.
Seven of the eleven sectors are reporting year-over-year earnings growth, led by the Communication Services, Consumer Discretionary, Utilities, and Information Technology sectors. On the other hand, four sectors are reporting a year-over-year decline in earnings: Energy, Materials, Health Care, and Financials.
In terms of revenues, 65% of S&P 500 companies have reported actual revenues above estimates, which is below the 5-year average of 68% but above the 10-year average of 64%. In aggregate, companies are reporting revenues that are 1.2% above the estimates, which is below the 5-year average of 2.0% and below the 10-year average of 1.3%. Again, historical averages reflect actual results from all 500 companies, not the actual results from the percentage of companies that have reported through this point in time.
The blended revenue growth rate for the fourth quarter is 3.9% today, compared to a revenue growth rate of 3.5% last week and a revenue growth rate of 3.1% at the end of the fourth quarter (December 31).
Positive revenue surprises reported by companies in multiple sectors (led by the Health Care sector), were the largest contributors to the increase in overall revenues for the index over the past week. Positive revenue surprises reported by companies in the Health Care and Consumer Discretionary sectors, partially offset by downward revisions to revenue estimates and negative revenue surprises in the Energy sector, have been the largest contributors to the increase in overall revenues for the index since the end of the quarter.
If 3.9% is the actual revenue growth rate for the quarter, it will mark the 13th consecutive quarter of revenue growth for the index.
Nine sectors are reporting year-over-year growth in revenues, led by the Communication Services, Health Care, and Information sectors. On the other hand, two sectors are reporting a year-over-year decline in revenues: Energy and Materials.
Looking ahead, analysts expect (year-over-year) earnings growth of 4.0% for Q1 2024 and 9.1% for Q2 2024. For CY 2024, analysts are calling for (year-over-year) earnings growth of 10.9%.
The forward 12-month P/E ratio is 20.3, which is above the 5-year average (18.9) and above the 10-year average (17.7). It is also above the forward P/E ratio of 19.5 recorded at the end of the fourth quarter (December 31).
During the upcoming week, 62 S&P 500 companies (including two Dow 30 components) are scheduled to report results for the fourth quarter.
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