S&P 500 Earnings Season Update: October 20, 2023

At this early stage, the third quarter earnings season for the S&P 500 is off to an average start. Both the number of positive earnings surprises and the magnitude of these earnings surprises are near their 10-year averages. However, downward revisions to EPS estimates for two companies in the Health Care sector offset the positive EPS surprises reported during the past few weeks. As a result, the index is reporting lower 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 currently reporting a year-over-year decline in earnings for the fourth straight quarter.

Overall, 17% of the companies in the S&P 500 have reported actual results for Q3 2023 to date. Of these companies, 73% have reported actual EPS above estimates, which is below the 5-year average of 77% and slightly below the 10-year average of 74%. In aggregate, companies are reporting earnings that are 6.6% above estimates, which is below the 5-year average of 8.5% but equal to the 10-year average of 6.6%.

However, downward revisions to EPS estimates for two companies in the Health Care sector offset the positive earnings surprises reported by companies during the past week. As a result, the index is reporting lower 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 decline for the third quarter is -0.4% today, compared to an earnings growth rate of 0.3% last week and an earnings decline of -0.3% at the end of the third quarter (September 30).

If -0.4% % is the actual decline for the quarter, it will mark the fourth straight quarter of year-over-year earnings declines reported by the index.

Eight of the 11 sectors are reporting (or are expected to report) 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, Materials, and Health Care.

In terms of revenues, 66% of S&P 500 companies have reported actual revenues above estimates, which is below the 5-year average of 68% but above 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%.

The blended revenue growth rate for the third quarter is 1.8% today, compared to a revenue growth rate of 1.9% last week and a revenue growth rate of 1.6% at the end of the third quarter (September 30).

Upward revisions to revenue estimates for companies in the Energy sector have been the largest contributor to the increase in the overall revenue growth rate for the index since the end of the quarter.

If 1.8% is the actual revenue growth rate for the quarter, it will mark the 11th 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 Consumer Discretionary sector. On the other hand, two sectors are reporting a year-over-year decline in revenues: Energy and Materials.

Looking ahead, analysts expect (year-over-year) earnings growth of 6.7% for Q4 2023. For CY 2023, analysts predict (year-over-year) earnings growth of 0.7%. For CY 2024, analysts are calling for (year-over-year) earnings growth of 12.2%.

The forward 12-month P/E ratio is 17.7, which is below the 5-year average (18.7) but above the 10-year average (17.5). It is also below the forward P/E ratio of 17.8 recorded at the end of the third quarter (September 30).

During the upcoming week, 160 S&P 500 companies (including 12 Dow 30 components) are scheduled to report results for the third quarter.

Q3 2023: Scorecard

Q3 2023: Growth

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