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S&P 500 Earnings Season Update: January 26, 2024

Earnings

By John Butters  |  January 26, 2024

At this stage of the fourth quarter earnings season, the overall performance of the S&P 500 continues to be subpar. 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. Most of this below-average performance relative to estimates is due to companies in the Financials sector. However, the earning numbers did improve over the past week. As a result, the index is reporting higher earnings for the fourth quarter today relative to the end of last week, but still reporting lower earnings today relative to the end of the quarter. On a year-over-year basis, the index is reporting a decline in earnings for the fourth time in the past five quarters.

Overall, 25% of the companies in the S&P 500 have reported actual results for Q4 2023 to date. Of these companies, 69% 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 5.3% 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 higher earnings for the fourth quarter today relative to the end of last week, but lower earnings today 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 -1.4% today, compared to an earnings decline of -1.8% 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 Industrials and Information Technology sectors) were the largest contributors to the increase in overall earnings for the index during the past week. Negative earnings surprises reported by companies in the Financials sector have been the largest contributor to the decrease in overall earnings for the index since the end of the quarter.

If -1.4% 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.

Seven of the eleven sectors are reporting year-over-year earnings growth, led by the Communication Services, Utilities, Consumer Discretionary, 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, 68% of S&P 500 companies have reported actual revenues above estimates, which is equal to the 5-year average of 68% and above the 10-year average of 64%. In aggregate, companies are reporting revenues that are 1.0% 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 3.2% 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).

Positive revenue surprises reported by companies in multiple sectors (led by the Industrials, Communication Services, and Health Care sectors) 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, Industrials, and Communication Services sectors, partially offset by negative revenue surprises and downward revisions to revenue estimates in the Energy and Financials sectors, have been the largest contributors to the increase in overall revenues for the index since the end of the quarter.

If 3.2% 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, Information Technology, Financials, and Real Estate 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 4.6% for Q1 2024 and 9.4% for Q2 2024. For CY 2024, analysts are calling for (year-over-year) earnings growth of 11.6%.

The forward 12-month P/E ratio is 20.0, which is above the 5-year average (18.9) and above the 10-year average (17.6). 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, 106 S&P 500 companies (including six Dow 30 components) are scheduled to report results for the fourth quarter.

Q4 2023: Scorecard

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02-s&p-500-revenues-above-in-line-below-estimates_q4-2023

Q4 2023: Growth

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04-s&p-500-revenue-growth-year-over-year-q4-2023

 

This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

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John Butters

Vice President, Senior Earnings Analyst

Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His weekly research report, “Earnings Insight,” provides analysis and commentary on trends in corporate earnings data for the S&P 500 including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).

The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.