S&P 500 Reporting A Lower Net Profit Margin For 7th Straight Quarter

Given continuing concerns about inflation, what is the S&P 500 reporting for a net profit margin for the first quarter?

The (blended) net profit margin for the S&P 500 for Q1 2023 is 11.2%, which is below the previous quarter’s net profit margin, below the year-ago net profit margin, and below the 5-year average net profit margin (11.4%). If 11.2% is the actual net profit margin for the quarter, it will mark the seventh straight quarter in which the net profit margin for the index has declined quarter-over-quarter. It will also mark the lowest net profit margin reported by the index since Q4 2020 (10.9%).

At the sector level, three sectors are reporting a year-over-year increase in their net profit margins in Q1 2023 compared to Q1 2022, led by the Energy (11.8% vs. 10.4%) and Consumer Discretionary (6.0% vs. 4.7%) sectors. On the other hand, eight sectors are reporting a year-over-year decrease in their net profit margins in Q1 2023 compared to Q1 2022, led by the Materials (9.8% vs. 13.8%) sector.

Five sectors are reporting net profit margins in Q1 2023 that are above their 5-year averages, led by the Energy (11.8% vs. 7.9%) sector. On the other hand, six sectors are reporting net profit margins in Q1 2023 that are below their 5-year averages, led by the Communication Services (10.3% vs. 11.6%), Health Care (9.2% vs. 10.5%), and Information Technology (21.6% vs. 22.9%) sectors.

Four sectors are reporting a quarter-over-quarter increase in their net profit margins in Q1 2023 compared to Q4 2022, led by the Utilities (13.6% vs. 9.6%) sector. On the other hand, seven sectors are reporting a quarter-over-quarter decrease in their net profit margins in Q1 2023 compared to Q4 2022, led by the Information Technology (21.6% vs. 24.0%) sector.

It is interesting to note that analysts believe net profit margins for the S&P 500 will be higher going forward. As of today, the estimated net profit margins for Q2 2023, Q3 2023, and Q4 2023 are 11.6%, 11.9%, and 11.8%, respectively.

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