S&P 500 Earnings Season Update: January 31, 2020

To date, 45% 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 (69%) is below the five-year average. In aggregate, companies are reporting earnings that are 4.1% above the estimates, which is also below the five-year average. In terms of sales, the percentage of companies (65%) reporting actual sales above estimates is above the five-year average. In aggregate, companies are reporting sales that are 0.6% above estimates, which is below 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 -0.3%, which is smaller than the earnings decline of -1.8% last week. Positive earnings surprises recorded by companies in the Information Technology and Consumer Discretionary sectors, partially offset by negative earnings surprises reported by companies in the Industrials sector, were mainly responsible for the decrease in the overall earnings decline during the week. If -0.3% 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. Seven 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: Energy, Industrials, Materials, and Consumer Discretionary.

The blended revenue growth rate for the third quarter is 3.1%, which is slightly above the revenue growth rate of 3.0% last week. Positive revenue surprises reported by companies in multiple sectors (led by the Information Technology sector) were responsible for the small increase in the overall revenue growth rate during the week. Eight sectors are reporting year-over-year growth in revenues, led by the Health Care and Communications Services sectors. Three sectors are reporting a year-over-year decline in revenues, led by the Materials sector.

Looking ahead, analysts see earnings growth of 3% to 6% for Q1 2020 and Q2 2020.

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

During the upcoming week, 94 S&P 500 companies (including two Dow 30 components) are scheduled to report results for the fourth quarter.