Positive earnings revisions are back on the march this earnings season, according to data from Citi and Fact Set.
Upward revisions have spiked to 66.2% of all analysts’ estimate changes so far in October, compared to less than 50% in September.
Consumer Discretionary, Financials, Healthcare, Technology, and Utilities have seen exceptional spikes in upward revisions, as shown below. For example, over 75% of earnings revisions have been positive for Healthcare in October, compared to under 45% in September:
Thus for the S&P 500 as a whole, we’ve gone from the majority of revisions being negative to the majority being positive, in just one month.
Yes companies tend to low ball earnings and the ‘surprise’ analysts, prompting upward revisions… yet even this earnings estimate game can’t be blamed for the surge in upward revisions. As shown below, the trend of higher earnings revisions is substantially higher than what has been normal since 1990. (This uses data from Citi)
Note both charts have their left hand axis starting at 30% to make them easier to read. We also just show select sectors, data for all sectors is below. The one sector to see a deterioration in revisions was Telecom, where upward revisions slipped to just 30% of all revisions, from 40% in September. Otherwise, all sectors have seen an improvement: