S&P 500 Earnings Season Update: January 24, 2020

To date, 17% of the companies in the S&P 500 have reported actual results for Q4 2019. In terms of earnings, the percentage of companies reporting actual EPS above estimates (73%) is above the five-year average. In aggregate, companies are reporting earnings that are 3.2% above the estimates, which is below the five-year average. In terms of sales, the percentage of companies (67%) reporting actual sales above estimates is above the five-year average. In aggregate, companies are reporting sales that are 1.3% above estimates, which is also above the five-year average.

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 -1.9%, which is smaller than the earnings decline of -2.4% last week. Positive earnings surprises recorded by companies in the Information Technology sector were mainly responsible for the decrease in the overall earnings decline during the week. If -1.9% is the actual decline for the quarter, it will mark the first time the index has reported four straight quarters of year-over-year declines in earnings since Q3 2015 through Q2 2016. Six sectors are reporting year-over-year growth in earnings, led by the Utilities sector. Four sectors are reporting a year-over-year decline in earnings, led by the Energy, Consumer Discretionary, and Materials sectors. One sector (Information Technology) is reporting flat earnings (0.0%) compared to last year.

The blended revenue growth rate for the third quarter is 2.9%, which is slightly above the revenue growth rate of 2.8% last week. Positive revenue surprises reported by companies in the Information Technology and Financials sectors were mainly responsible for the small increase in the overall revenue growth rate during the week. If 2.9% is the actual growth rate for the quarter, it will mark the lowest revenue growth rate for the index since Q3 2016 (2.7%). Eight sectors are reporting year-over-year growth in revenues, led by the Health Care, Utilities, and Communications Services sectors. Three sectors are reporting a year-over-year decline in revenues, led by the Materials sector.

Looking ahead, analysts see mid-single-digit earnings growth for Q1 2020 and Q2 2020.

The forward 12-month P/E ratio is 18.6, which is above the five-year average and above the 10-year average.

During the upcoming week, 147 S&P 500 companies (including 14 Dow 30 components) are scheduled to report results for the fourth quarter.