The blended (combines actual results for companies that have reported and estimated results for companies yet to report) earnings growth rate for the S&P 500 for the fourth quarter is 0.7% as of February 7. This growth rate is above the estimated earnings decline of -1.7% at the end of the quarter (December 31).
If 0.7% is the actual growth rate for the fourth quarter, it will mark the first time the index has reported year-over-year growth in earnings since Q4 2018 (13.3%). It is not surprising that the index is now reporting earnings growth for the fourth quarter. For more details, please refer to my article published on January 3.
What is driving the increase in the earnings growth rate since December 31? In aggregate, positive earnings surprises reported by S&P 500 companies have led to a net $8.5 billion increase in earnings for the index since December 31 (as higher actual earnings replace estimated earnings in the growth rate calculation).
The Information Technology sector is the largest contributor to this increase in earnings, accounting for $5.4 billion of the net $8.5 billion increase (or about 63%). The positive earnings surprises reported by Apple ($4.99 vs. $4.55), Microsoft ($1.53 vs. $1.32), and Intel ($1.52 vs. $1.25) were substantial contributors to the increase in earnings for the index during this time. As a result, the blended earnings growth rate for the Information Technology sector improved to 5.1% on February 7 from -1.9% on December 31.
Outside of the Information Technology sector, the positive EPS surprises reported by Alphabet ($15.35 vs. $12.49) and Amazon.com ($6.47 vs. $4.04) were also significant contributors to the increase in earnings for the index since December 31.
Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His weekly research report, “Earnings Insight,” provides analysis and commentary on trends in corporate earnings data for the S&P 500 including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).
The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.