Corporate Earnings Beat Rates Have Been On A 20-Year Upward Trend

It’s pretty well known that companies tend to announce quarterly earnings that beat Wall Street’s consensus estimate.

So far, around a third of the S&P 500 have announced Q4 earnings, and around 66% of those companies have announced EPS that beat expectations.

Historically, however, more than 70 per cent of companies announced earnings ahead of expectations.  RBC Capital Market’s Myles Zyblock notes that this underperformance has caused sentiment surrounding this earnings season to be “uninspiring and even dour.”

For some context, here’s a 20-year look at earnings beat rates from Zyblock.  Note the upward trend.

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Photo: RBC Capital Markets

Here’s a look at the beat rates on a trend-adjusted basis.

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Photo: RBC Capital Markets

And here’s a look at trend-adjusted earnings surprises overlaid with global manufacturing purchasing managers indices (PMI). Zyblock notes that earnings beat rates are positively correlated to the business cycle as measured by leading indicators.

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Photo: RBC Capital Markets

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