S&P 500 Earnings Season Update: January 19, 2024

At this early stage, the fourth quarter earnings season for the S&P 500 is off to a weak start. The percentage of S&P 500 companies reporting positive earnings surprises is below average, while companies are reporting actual earnings that are below estimates in aggregate. However, this subpar performance relative to estimates is mainly due to companies in the Financials sector. As a result, the index is reporting lower earnings for the fourth quarter today relative to the end of last week and relative to the end of the quarter. The index is now reporting a year-over-year decline in earnings for the fourth time in the past five quarters.

Overall, 10% of the companies in the S&P 500 have reported actual results for Q4 2023 to date. Of these companies, 62% have reported actual EPS above estimates, which is below the 5-year average of 77% and below the 10-year average of 74%. In aggregate, companies are reporting earnings that are 18.1% below estimates, which is below the 5-year average of 8.5% above estimates and below the 10-year average of 6.7% above estimates. 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 lower 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 decline for the fourth quarter is -1.7% today, compared to an earnings decline of -0.3% last week and an earnings growth rate of 1.6% at the end of the fourth quarter (December 31).

Negative earnings surprises reported by companies in the Financials sector have been the largest contributor to the decrease in the overall earnings for the index over the past week and since the end of the quarter.

If -1.7% is the actual decline for the quarter, it will mark the fourth time in the past five quarters that the index has reported a year-over-year decline in earnings.

Five of the eleven sectors are reporting (or are expected to report) year-over-year earnings growth, led by the Communication Services, Utilities, Consumer Discretionary, and Information Technology sectors. On the other hand, five sectors are reporting a year-over-year decline in earnings, led by the Energy, Materials, Health Care, and Financials sectors. The Consumer Staples sector is currently reporting flat year-over-year earnings (0.0%).

In terms of revenues, 62% of S&P 500 companies have reported actual revenues above estimates, which is below the 5-year average of 68% and below the 10-year average of 64%. In aggregate, companies are reporting revenues that are 0.5% 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 2.9% today, compared to a revenue growth rate of 2.9% last week and a revenue growth rate of 3.1% at the end of the fourth quarter (December 31).

Downward revisions to revenue estimates and negative revenue surprises for companies in the Energy and Financials sectors have been the largest contributors to the decrease in overall revenues for the index since the end of the quarter.

If 2.9% is the actual revenue growth rate for the quarter, it will mark the 13^th consecutive quarter of revenue growth for the index.

Eight sectors are reporting (or are projected to report) year-over-year growth in revenues, led by the Financials, Real Estate, Information Technology, and Communication Services sectors. On the other hand, three sectors are reporting (or are predicted to report) a year-over-year decline in revenues, led by the Energy and Materials sectors.

Looking ahead, analysts expect (year-over-year) earnings growth of 5.4% for Q1 2024 and 10.0% for Q2 2024. For CY 2024, analysts are calling for (year-over-year) earnings growth of 12.2%.

The forward 12-month P/E ratio is 19.5, which is above the 5-year average (18.9) and above the 10-year average (17.6). It is equal to the forward P/E ratio of 19.5 recorded at the end of the fourth quarter (December 31).

During the upcoming week, 75 S&P 500 companies (including 10 Dow 30 components) are scheduled to report results for the fourth quarter.

Q4 2023: Scorecard

Q4 2023: Growth

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