S&P 500 Earnings Season Update: July 21, 2023

At this early stage of the Q2 earnings season for the S&P 500, the number of positive earnings surprises is in line with recent averages, while the magnitude of these earnings surprises is equal to the 10-year average. However, downward revisions to EPS estimates for a company in the Health Care sector offset the positive EPS surprises reported during the past week. As a result, the index is reporting lower earnings for the second quarter today relative to the end of last week and relative to the end of the quarter. The index is reporting its largest year-over-year decline in earnings since Q2 2020.

Overall, 18% of the companies in the S&P 500 have reported actual results for Q2 2023 to date. Of these companies, 75% have reported actual EPS above estimates, which is below the 5-year average of 77% but above the 10-year average of 73%. In aggregate, companies are reporting earnings that are 6.4% above estimates, which is below the 5-year average of 8.4% but equal to the 10-year average of 6.4%.

However, downward revisions to EPS estimates for a company in the Health Care sector offset the positive earnings surprises reported by companies during the week. As a result, the index is reporting lower earnings for the second 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 second quarter is -9.0% today, compared to an earnings decline of -7.2% last week and an earnings decline of -7.0% at the end of the second quarter (June 30).

If -9.0% is the actual decline for the quarter, it will mark the largest earnings decline reported by the index since Q2 2020 (-31.6%). It will also mark the third straight quarter in which the index has reported a decrease in earnings.

Six of the eleven sectors are reporting year-over-year earnings growth, led by the Consumer Discretionary and Communication Services sectors. On the other hand, five sectors are reporting (or are expected to report) a year-over-year decline in earnings, led by the Energy, Materials, and Health Care sectors.

In terms of revenues, 61% of S&P 500 companies have reported actual revenues above estimates, which is below the 5-year average of 69% and below 10-year average of 63%. In aggregate, companies are reporting revenues that are 1.4% above the estimates, which is below the 5-year average of 2.0% but above the 10-year average of 1.3%.

The blended revenue decline for the second quarter is -0.3% today, compared to a revenue decline of -0.4% last week and a revenue decline of -0.3% at the end of the second quarter (June 30).

If -0.3% is the actual decline for the quarter, it will mark the first time the index has reported a year-over-year decline in revenues since Q3 2020 (-1.1%).

Seven sectors are reporting year-over-year growth in revenues, led by the Financials and Consumer Discretionary sectors. On the other hand, four 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 still expect earnings growth for the second half of 2023. For Q3 2023 and Q4 2023, analysts are projecting earnings growth of 0.1% and 7.5%, respectively. For all of CY 2023, analysts predict earnings growth of 0.1%.

The forward 12-month P/E ratio is 19.5, which is above the 5-year average (18.6) and above the 10-year average (17.4). It is also above the forward P/E ratio of 19.1 recorded at the end of the second quarter (June 30).

During the upcoming week, 166 S&P 500 companies (including 12 Dow 30 components) are scheduled to report results for the second quarter.

For a list of the high-profile S&P 500 companies reporting earnings the week of July 24 - 28, view the schedule of earnings calls. 

Q2 2023: Scorecard

Q2 2023: Growth

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