FactSet Insight - Commentary and research from our desk to yours

S&P 500 Earnings Season Update: January 25

Written by John Butters | Jan 25, 2018

To date, 24% of the companies in the S&P 500 have reported actual results for Q4 2017. In terms of earnings, more companies are reporting actual EPS above estimates (76%) compared to the five-year average. In aggregate, companies are reporting earnings that are 4.5% above the estimates, which is also above the five-year average. In terms of sales, more companies (81%) are reporting actual sales above estimates compared to the five-year average. In aggregate, companies are reporting sales that are 1.1% above estimates, which is also above the five-year average.

Sector-Level Breakdown

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 12.0% today, which is above the earnings growth rate of 11.7% last week. Positive earnings surprises reported by companies in multiple sectors were responsible for the small increase in the earnings growth rate for the index during the past week. All 11 sectors are reporting year-over-year earnings growth. Five of these sectors are reporting double-digit earnings growth: Energy, Materials, Information Technology, Financials, and Utilities. On the other hand, the Telecom Services sector is reporting the lowest year-over-year earnings growth.

The blended sales growth rate for the fourth quarter is 7.0% today, which is slightly above the sales growth rate of 6.9% last week. Positive revenue surprises reported by companies in multiple sectors were responsible for the small uptick in the revenue growth rate for the index during the week. All eleven sectors are reporting year-over-year growth in revenues. Three sectors are reporting double-digit growth in revenues: Energy, Materials, and Information Technology. The Telecom Services and Financials sectors are reporting the lowest revenue growth for the quarter.

Looking at future quarters, analysts currently project earnings to grow at double-digit levels through 2018.

The forward 12-month P/E ratio is 18.4, which is above the five-year average and the 10-year average.

During the upcoming week, 125 S&P 500 companies (including ten Dow 30 components) are scheduled to report results for the fourth quarter.

 For more, download the complete Earning Insight report.

Author’s Note: In last week’s report and article, we noted that the blended earnings growth rate for the S&P 500 for Q4 had dropped to -0.2% from 10.0% during the week. We stated that the decline in earnings growth was mainly due to the large negative earnings surprise reported by Citigroup, due to the inclusion of charges related to the recently passed tax law in the actual EPS number reported by the company. Upon reviewing notes from analysts after the earnings release for Citigroup, FactSet determined that the majority of analysts were excluding the tax law charges from their EPS estimates for the company.  As a result, the actual EPS number for Citigroup was changed (after the publication of last week’s report) from -$7.15 (including the tax law charges and expenses) to $1.28 (excluding the tax law charges and expenses). In addition to Citigroup, FactSet reviewed the basis of EPS estimates and revised the actual EPS numbers of other companies in the Financials sector that reported results last week to reflect the exclusion of charges and gains related to the tax law.

As a result of these changes, the blended earnings growth rate for the Financials sector for Q4 last Friday was 13.1% (not -57.1% as published last week), and the blended earnings growth rate for the S&P 500 was 11.7% (not -0.2% as published last week). These growth rate numbers will be the growth rate numbers for last week referenced in the remainder of today’s report and article.