At this early stage, the third quarter earnings season for the S&P 500 is off to a mixed start. While the percentage of S&P 500 companies reporting positive earnings surprises is above recent averages, the magnitude of earnings surprises is below recent averages. In addition, analysts have continued to lower EPS estimates significantly for companies in three sectors since September 30.
As a result, the index is reporting higher earnings for the third quarter today relative to the end of last week, but it is reporting lower earnings for the third quarter today relative to the end of the quarter. Overall, the index is reporting (year-over-year) earnings growth for the fifth-straight quarter. However, the index is also reporting its lowest earnings growth since Q2 2023 (-4.2%).
Overall, 14% of the companies in the S&P 500 have reported actual results for Q3 2024 to date. Of these companies, 79% have reported actual EPS above estimates, which is above the 5-year average of 77% and above the 10-year average of 74%. In aggregate, companies are reporting earnings that are 6.1% above estimates, which is below the 5-year average of 8.5% and below the 10-year average of 6.8%. 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 EPS surprises reported by companies in the Financials sector, partially offset by downward revisions to EPS estimates for a company in the Industrials sector, were the largest contributors to the increase in the overall earnings growth rate for the index over this period. Since September 30, downward revisions to EPS estimates for companies in the Industrials, Health Care, and Energy sectors, partially offset by positive EPS surprises reported by companies in the Financials sector, have been the largest contributors to the decrease in the overall earnings growth rate for the index over this period.
As a result, the index is reporting higher earnings for the third quarter today relative to the end of last week, but lower earnings today 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 rate for the third quarter is 3.4% today, compared to an earnings growth rate of 2.9% last week and an earnings growth rate of 4.3% at the end of the third quarter (September 30).
If 3.4% is the actual growth rate for the quarter, it will mark the fifth consecutive quarter of year-over-year earnings growth for the index. However, it will also mark the lowest earnings growth rate reported by the index since Q2 2023 (-4.2%).
Eight of the eleven sectors are reporting (or are projected to report) year-over-year growth, led by the Information Technology and Communication Services. On the other hand, three sectors are reporting a year-over-year decline in earnings, led by the Energy sector.
In terms of revenues, 64% of S&P 500 companies have reported actual revenues above estimates, which is below the 5-year average of 69% but equal to the 10-year average of 64%. In aggregate, companies are reporting revenues that are 1.1% above the estimates, which is below the 5-year average of 2.0% and below the 10-year average of 1.4%. 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 the Health Care, Financials, and Consumer Staples sectors, partially offset by downward revisions to revenue estimates for companies in the Energy sector, were the largest contributors to the slight increase in the overall revenue growth rate for the index over this period. Since September 30, positive revenue surprises reported by companies in the Financials and Health Care sectors have been offset by downward revisions to revenue estimates for companies in the Energy and Industrials sectors, resulting in no change to the overall revenue growth rate for the index over this period.
As a result, the blended revenue growth rate for the third quarter is 4.7% today, compared to a revenue growth rate of 4.6% last week and a revenue growth rate of 4.7% at the end of the third quarter (September 30).
If 4.7% is the actual revenue growth rate for the quarter, it will mark the 16th consecutive quarter of revenue growth for the index.
Nine sectors are reporting (or are projected to report) year-over-year growth in revenues, led by the Information Technology sector. On the other hand, two sectors are reporting a year-over-year decline in revenues, led by the Energy sector.
Looking ahead, analysts expect (year-over-year) earnings growth rates of 14.0%, 13.8%, and 13.0% for Q4 2024, Q1 2025, and Q2 2025, respectively. For CY 2024, analysts are calling for (year-over-year) earnings growth of 9.4%. For CY 2025, analysts are predicting (year-over-year) earnings growth of 15.1%.
The forward 12-month P/E ratio is 21.9, which is above the 5-year average (19.5) and above the 10-year average (18.1). This P/E ratio is also above the forward P/E ratio of 21.6 recorded at the end of the third quarter (September 30).
During the upcoming week, 112 S&P 500 companies (including 7 Dow 30 components) are scheduled to report results for the third quarter.
Q3 2024: Scorecard
Q3 2024: Growth
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