So far, 17 percent of the companies in S&P 500 have reported their Q3 earnings. Let’s take a look at the key takeaways,
Earnings:
- So far, 80 percent of the companies that reported actual results, reported better than expected earnings. Only 20 percent of the companies reported worse than estimated earnings. Average earnings growth rate so far is 19.5 percent, which is much lower than 24.5 percent reported last quarter. This is the third highest pace of growth since Q1 2011. After the quarter, S&P500 companies had forecasted 19.3 percent growth. So far, only 5 sectors have beaten that estimate.
- Earnings surprise percentage is at +3.9 percent, which is below the 5-year average of +4.6 percent and below the 1-year average of +5.4 percent.
- At the sector level, the Communication Services (100%), Information Technology (100 percent), and Consumer Discretionary (88%) sectors have the highest percentages of companies reporting earnings above estimates, while the Materials (50%), and Energy (50%) sectors have the lowest percentage of companies reporting earnings above estimates.
Sales:
- 64 percent of the companies reported higher sales than estimated, so far. Sales growth rate is at 7.4 percent, which is lower than 9.5 percent reported last quarter.
- At the sector level, the Communication Services (100%), Real Estate (100 percent), and Health Care (100%) sectors have the highest percentages of companies reporting revenues above estimates, while the Energy (0%) sector has the lowest percentage of companies reporting revenues above estimates.
Q4 2018/Q1, Q2 2019 forecast:
- For Q4 2018, analysts are projecting earnings growth of 16.5 percent and revenue growth of 6.5 percent.
- For Q1 2019, analysts are projecting earnings growth of 6.8 percent and revenue growth of 6.6 percent.
- For Q2 2019, analysts are projecting earnings growth of 7 percent and revenue growth of 5 percent.
The current forward 12-month P/E ratio for the S&P 500 is at 15.9, below the 5-year average of 16.3 and higher than the 10-year average of 14.5
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 2780, while DOW is at 25444, and NASDAQ at 7450.
