S&P 500 Earnings Season Update: November 1, 2019

To date, 71% of the companies in the S&P 500 have reported actual results for Q3 2019. In terms of earnings, the percentage of companies reporting actual EPS above estimates (76%) is above the 5-year average. In aggregate, companies are reporting earnings that are 3.8% above the estimates, which is below the 5-year average. In terms of sales, the percentage of companies (61%) reporting actual sales above estimates is above the 5-year average. In aggregate, companies are reporting sales that are 0.9% above estimates, which is also above the 5-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 third quarter is -2.7%, which is smaller than the earnings decline of -3.8% last week. Positive earnings surprises reported by companies in multiple sectors (led by the Health Care and Information Technology sectors) were responsible for the decrease in the overall earnings decline during the week. If -2.7% is the actual decline for the quarter, it will mark the first time the index has reported three straight quarters of year-over-year declines in earnings since Q4 2015 through Q2 2016. It will also mark the largest year-over-year decline in earnings reported by the index since Q2 2016 (-3.2%). Five sectors are reporting year-over-year growth in earnings, led by the Health Care and Utilities sectors. Six sectors are reporting a year-over-year decline in earnings, led by the Energy, Materials, and Information Technology sectors.

The blended revenue growth rate for the third quarter is 3.1%, which is above the revenue growth rate of 2.8% last week. Positive revenue surprises reported by companies in multiple sectors were responsible for the increase in the overall revenue growth rate during the week. If 3.1% 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 sector. Three sectors are reporting a year-over-year decline in revenues, led by the Materials sector.

Looking ahead, analysts see a decline in earnings in the fourth quarter followed by 5% to 7% earnings growth for Q1 2020 and Q2 2020.

The forward 12-month P/E ratio is 17.2, which is above the 5-year average and above the 10-year average.

During the upcoming week, 90 S&P 500 companies (including 1 Dow 30 component) are scheduled to report results for the third quarter.