S&P 500 Earnings Season Update: November 8, 2019

To date, 89% 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 (75%) is above the five-year average. In aggregate, companies are reporting earnings that are 3.8% above the estimates, which is below the five-year average. In terms of sales, the percentage of companies (60%) reporting actual sales above estimates is above the five-year average. In aggregate, companies are reporting sales that are 0.9% above estimates, which is also above 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 third quarter is -2.4%, which is smaller than the earnings decline of -2.8% last week. Positive earnings surprises reported by companies in multiple sectors were responsible for the decrease in the overall earnings decline during the week. If -2.4% 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 (or have reported) year-over-year growth in earnings, led by the Utilities and Health Care sectors. Six sectors are reporting (or have reported) 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 3.2%, which is above the revenue growth rate of 3.1% 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 3.2% 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 (or have reported) 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 17.4, which is above the five-year average and above the 10-year average.

During the upcoming week, 15 S&P 500 companies (including two Dow 30 components) are scheduled to report results for the third quarter.