At the end of the peak weeks of the Q3 earnings season for the S&P 500, both the number of positive earnings surprises and the magnitude of these earnings surprises are above their 10-year averages. As a result, the index is reporting higher earnings for the third quarter today relative to the end of last week and relative to the end of the quarter. The S&P 500 is now reporting year-over-year growth in earnings for the first time since Q3 2022.
Overall, 81% of the companies in the S&P 500 have reported actual results for Q3 2023 to date. Of these companies, 82% have reported actual EPS above estimates, which is above the 5-year average of 77% and above the 10-year average of 74%. If 82% is the final number for the quarter, it will mark the highest percentage of S&P 500 companies reporting a positive EPS surprise since Q3 2021 (also 82%). In aggregate, companies are reporting earnings that are 7.1% above estimates, which is below the 5-year average of 8.5% but above the 10-year average of 6.6%. 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.
During the past week, positive earnings surprises reported by companies in multiple sectors (led by the Consumer Discretionary and Information Technology sectors), partially offset by negative earnings surprises reported by companies in the Health Care sector, were responsible for the increase in overall earnings for the index over this period. Since September 30, positive earnings surprises reported by companies in the Financials, Consumer Discretionary, Information Technology, and Communication Services sectors, partially offset by downward revisions to EPS estimates and negative earnings surprises for companies in the Health Care sector, have been the largest contributors to the increase in the earnings for the index during this period.
As a result, the index is reporting higher earnings for the third 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 growth for the third quarter is 3.7% today, compared to an earnings growth rate of 2.6% last week and an earnings decline of -0.3% at the end of the third quarter (September 30).
If 3.7% is the actual growth rate for the quarter, it will mark the first quarter of year-over-year earnings growth reported by the index since Q3 2022.
Eight of the eleven sectors are reporting year-over-year earnings growth, led by the Communication Services, Consumer Discretionary, and Financials sectors. On the other hand, three sectors are reporting a year-over-year decline in earnings: Energy, Health Care, and Materials.
In terms of revenues, 62% of S&P 500 companies have reported actual revenues above estimates, which is below the 5-year average of 68% and below the 10-year average of 64%. In aggregate, companies are reporting revenues that are 0.7% 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.
During the past week, positive revenue surprises reported by companies in multiple sectors (led by the Health Care sector) were responsible for the increase in overall revenues for the index over this period. Since September 30, upward revisions and positive revenue surprises for companies in the Energy and Health Care sectors have been the largest contributors to the increase in the overall revenue growth rate for the index during this period.
As a result, the blended revenue growth rate for the third quarter is 2.3% today, compared to a revenue growth rate of 2.1% last week and a revenue growth rate of 1.6% at the end of the third quarter (September 30).
If 2.3% is the actual revenue growth rate for the quarter, it will mark the 11th consecutive quarter of revenue growth for the index.
Eight sectors are reporting year-over-year growth in revenues, led by the Real Estate, Consumer Discretionary, and Communication Services sectors. On the other hand, three sectors are reporting a year-over-year decline in revenues, led by the Energy and Materials sectors.
Looking ahead, analysts expect (year-over-year) earnings growth of 3.9% for Q4 2023, which is below the estimate of 8.1% on September 30. For CY 2023, analysts predict (year-over-year) earnings growth of 0.6%, which is below the estimate of 0.8% on September 30. For CY 2024, analysts are calling for (year-over-year) earnings growth of 11.9%, which is below the estimate of 12.2% on September 30.
The forward 12-month P/E ratio is 17.8, which is below the 5-year average (18.7) but above the 10-year average (17.5). It is also equal to the forward P/E ratio of 17.8 recorded at the end of the third quarter (September 30).
During the upcoming week, 55 S&P 500 companies (including one Dow 30 component) are scheduled to report results for the third quarter.
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