S&P 500 Earnings Season Update: October 18, 2019

To date, 15% 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 (84%) is above the five-year average. In aggregate, companies are reporting earnings that are 2.6% above the estimates, which is below the five-year average. In terms of sales, the percentage of companies (64%) reporting actual sales above estimates is above the five-year average. In aggregate, companies are reporting sales that are 1.0% 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 -4.7%, which is equal to the earnings decline of -4.7% last week. Positive earnings surprises reported by companies in the Health Care and Financials sectors were offset by downward revisions to estimates for companies in the Energy sector, resulting in no change in the overall earnings decline for the week. If -4.7% 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. Four sectors are reporting (or are expected to report) year-over-year growth in earnings, led by the Real Estate and Utilities sectors. Seven sectors are reporting a year-over-year decline in earnings, led by the Energy, Information Technology, and Materials sectors.

The blended revenue growth rate for the third quarter is 2.6%, which is slightly below the revenue growth rate of 2.7% last week. Downward revisions to revenue estimates for companies in the Energy sector, partially offset by positive revenue surprises reported by companies in the Financials sector, were mainly responsible for the small decrease in the overall revenue growth rate during the week. If 2.6% is the actual growth rate for the quarter, it will mark the lowest revenue growth rate for the index since Q2 2016 (-0.2%). Eight sectors are reporting (or are projected to report) 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 and Energy sectors.

Looking ahead, analysts see low single-digit earnings growth in the fourth quarter followed by high single-digit earnings growth for both Q1 2020 and Q2 2020.

The forward 12-month P/E ratio is 17.0, which is above the five-year average and above the 10-year average.

During the upcoming week, 126 S&P 500 companies (including 12 Dow 30 components) are scheduled to report results for the third quarter.