FxWirePro: S&P 500 earnings update

5 percent of the companies in S&P 500 have reported their Q2 earnings. Let’s take a look at the key takeaways,

Earnings:

• So far, 89 percent of the companies that reported actual results, reported better than expected earnings. Only 11 percent of the companies reported worse than estimated earnings. Average earnings growth rate so far is 19.9 percent, which is lower than 20 percent reported last week. This is the highest pace of growth since Q3 2010. After the quarter, S&P500 companies had forecasted 18.9 percent growth. So far, five sectors have beaten that estimate.
• Earnings surprise percentage is at +2.1 percent, which is above the 5-year average of +4.4 percent and the 1-year average of +5.6 percent. This is the highest number since Q4 2010. However, it is lower than +8.3 percent two weeks ago.
• At the sector level, the Consumer Discretionary (100%) and Industrials (100%) sectors have the highest percentages of companies reporting earnings above estimates, while the Financials (75%) sector has the lowest percentage of companies reporting earnings above estimates.

Sales:

• 89 percent of the companies reported higher sales than estimated, so far, which is the highest reading since at least 2008. Sales growth rate is at 7.9 percent, which is lower than 8.5 percent reported last quarter.
• At the sector level, the Industrials (100%) and Information Technology (100%) sectors have the highest percentages of companies reporting revenues above estimates, while the Financials (50%) sector has the lowest percentage of companies reporting revenues above estimates.

Q3/Q4/2018 forecast:

• For Q3 2018, analysts are projecting earnings growth of 21.5 percent and revenue growth of 7.6 percent.
• For Q4 2018, analysts are projecting earnings growth of 17.8 percent and revenue growth of 5.7 percent.
• For Q1 2019, analysts are projecting earnings growth of 6.9 percent and revenue growth of 5.5 percent.

The current forward 12-month P/E ratio for the S&P 500 is at 16.6, same as its 5-year average of 16.2 and higher than the 10-year average of 14.4

Better than expected earnings in 2017/18 have pushed all three, S&P 500, Dow Jones Industrial Average, and NASDAQ to all-time highs, though the indices have been struggling lately. S&P 500 is currently trading at 2806, while DOW is at 25019, and NASDAQ at 7826.