S&P 500 Earnings Season Update: October 26, 2018

To date, 48% of the companies in the S&P 500 have reported actual results for Q3. Companies are outperforming recent averages on the earnings side and performing in line with recent averages on the revenue side. In terms of earnings, the percentage of companies reporting actual EPS above estimates (77%) is above the five-year average. In aggregate, companies are reporting earnings that are 6.5% above the estimates, which is also above the five-year average. In terms of sales, the percentage of companies reporting sales above estimates (59%) is equal to the five-year average. In aggregate, companies are reporting sales that are 0.8% above estimates, which is slightly 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), year-over-year earnings growth rate for the third quarter is 22.5% today, which is above the earnings growth rate of 19.4% last week. Positive earnings surprises reported by companies in multiple sectors (led by the Information Technology, Communication Services, and Consumer Discretionary sectors) were responsible for the increase in the overall earnings growth rate during the week. If 22.5% is the actual growth rate for the quarter, it will mark the third highest earnings growth since Q3 2010. All 11 sectors are reporting year-over-year earnings growth. Eight sectors are reporting double-digit earnings growth, led by the Energy, Financials, Communication Services, and Materials sectors.

The blended, year-over-year sales growth rate for the third quarter is 7.6% today, which is above the sales growth rate of 7.4% last week. Positive revenue surprises reported by companies in multiple sectors were responsible for the slight increase in the overall revenue growth rate during the week. All 11 sectors are reporting year-over-year growth in revenues. Three sectors are reporting double-digit growth in revenues: Energy, Communication Services, and Real Estate.

Looking at future quarters, analysts see double-digit earnings growth for the fourth quarter, but also see single-digit earnings growth for the first half of 2019.

The forward 12-month P/E ratio is 15.5, which is below the five-year average but above the 10-year average.

During the upcoming week, 139 S&P 500 companies (including six Dow 30 components) are scheduled to report results for the third quarter.