S&P 500 Reporting A Lower Year-Over-Year Net Profit Margin For the 7th Straight Quarter

Given continuing concerns in the market about inflation, what is the S&P 500 reporting for a net profit margin for Q3?

The (blended) net profit margin for the S&P 500 for Q3 2023 is 11.6%, which is below the year-ago net profit margin (11.9%), equal to the previous quarter’s net profit margin (11.6%), and above the 5-year average (11.4%). If 11.6% is the actual net profit margin for the quarter, it will mark the seventh straight quarter in which the net profit margin has declined year-over-year.

At the sector level, six sectors are reporting a year-over-year increase in their net profit margins in Q3 2023 compared to Q3 2022, led by the Communication Services (12.2% vs. 9.8%) sector. On the other hand, five sectors are reporting a year-over-year decrease in their net profit margins in Q3 2023 compared to Q3 2022, led by the Energy (11.0% vs. 14.4%) and Health Care (8,1% vs. 10.5%) sectors.

Eight sectors are reporting net profit margins in Q3 2023 that are above their 5-year averages, led by the Energy (11.0% vs. 8.4%) sector. On the other hand, three sectors are reporting net profit margins in Q3 2023 that are below their 5-year averages, led by the Health Care (8.1% vs. 10.3%) sector.

Five sectors are reporting a quarter-over-quarter increase in their net profit margins in Q3 2023 compared to Q2 2023, led by the Utilities (14.2% vs. 12.2%) sector. On the other hand, five sectors are reporting a quarter-over-quarter decrease in their net profit margins in Q3 2023 compared to Q2 2023, led by the Real Estate (35.2% vs. 37.3%) and Materials (9.7% vs. 11.8%) sectors.

It is interesting to note that analysts believe net profit margins for the S&P 500 will be higher in the first half of 2024. As of today, the estimated net profit margins for Q4 2023, Q1 2024, and Q2 2024 are 11.5%, 12.0%, and 12.3%, respectively.

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