S&P 500 Earnings Season Update: October 27, 2023

At the mid-point of the Q3 earnings season for the S&P 500, both the number of positive earnings surprises and the magnitude of these earnings surprises are above their 10-year averages. As a result, the index is reporting higher 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 now reporting year-over-year growth in earnings for the first time since Q3 2022.

Overall, 49% of the companies in the S&P 500 have reported actual results for Q3 2023 to date. Of these companies, 78% 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 7.7% above estimates, which is below the 5-year average of 8.5% but above the 10-year average of 6.6%. 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 earnings surprises reported by companies in multiple sectors (led by the Consumer Discretionary, Information Technology, and Communication Services sectors) were responsible for the increase in overall earnings for the index over this period. Since September 30, positive earnings surprises reported by companies in the Financials, Information Technology, Consumer Discretionary, and Communication Services sectors, partially offset by downward revisions to EPS estimates for two companies in the Health Care sector, have been the largest contributors to the increase in the earnings for the index during this period.

As a result, the index is reporting higher 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 growth for the third quarter is 2.7% today, compared to an earnings decline of -0.4% last week and an earnings decline of -0.3% at the end of the third quarter (September 30).

If 2.7% is the actual growth rate for the quarter, it will mark the first quarter of year-over-year earnings growth reported by the index since Q3 2022.

Eight of the eleven sectors are reporting 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, 62% of S&P 500 companies have reported actual revenues above estimates, which is below the 5-year average of 68% and below the 10-year average of 64%. In aggregate, companies are reporting revenues that are 0.8% above the estimates, which is below the 5-year average of 2.0% and below the 10-year average of 1.3%. 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 multiple sectors were responsible for the increase in overall revenues for the index over this period. Since September 30, upward revisions and positive revenue surprises for companies in the Energy sector have been the largest contributor to the increase in the overall revenue growth rate for the index during this period.

As a result, the blended revenue growth rate for the third quarter is 2.1% today, compared to a revenue growth rate of 1.8% last week and a revenue growth rate of 1.6% at the end of the third quarter (September 30).

If 2.1% is the actual revenue growth rate for the quarter, it will mark the 11^th consecutive quarter of revenue growth for the index.

Nine sectors are reporting year-over-year growth in revenues, led by the Consumer Discretionary and Communication Services sectors. 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 5.3% for Q4 2023, which is below the estimate of 8.1% on September 30. For CY 2023, analysts predict (year-over-year) earnings growth of 0.9%, which is equal to the estimate of 0.9% on September 30. For CY 2024, analysts are calling for (year-over-year) earnings growth of 11.9%, which is below the estimate of 12.2% on September 30.

The forward 12-month P/E ratio is 17.1, which is below the 5-year average (18.7) and below 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, 162 S&P 500 companies (including four Dow 30 components) are scheduled to report results for the third quarter.

Q3 2023: Scorecard

Q3 2023: Growth

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