Third quarter earnings have had the biggest upside surprises in a decade — but still haven't impressed weary investors

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  • Corporate earnings are coming in much better than expected, according to new data from FactSet.
  • With 64% of S&P 500 companies having reported third quarter earnings as of Friday, a record 86% of them beat EPS estimates, FactSet said
  • But despite largely better-than-feared results, earnings are still down 9.8% year-over-year due to the COVID-19 pandemic.
  • Here’s where third quarter earnings stand as of Friday’s close, and where they can go from here,
  • Visit Business Insider’s homepage for more stories.

As corporate earnings continue to roll in, it’s increasingly clear that analyst expectations were too pessimistic. Still, it’s becoming increasingly more difficult for companies to impress sceptical investors.

According to FactSet data released late Friday, 64% of S&P 500 companies have reported third quarter earnings as of Friday, and a record 86% of them have topped earnings estimates. Usually, only 73% have beat expectations over the past five years.

If current trends hold through the rest of this quarter’s earnings season, it would represent the highest percentage of S&P 500 companies reporting a positive EPS surprise since FactSet began tracking this metric in 2008.

And the earnings beats are sizable. According to FactSet, on average, companies are reporting earnings that are 19.3% above the estimates, which is well above the 5-year average of 5.6%.

The earnings beats are being driven by companies within the Communication Services, Energy, Industrials, and Consumer Discretionary sectors, according to FactSet.


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81% of S&P 500 companies that have reported third quarter earnings so far posted a positive revenue surprise, also representing the biggest beat since 2008, if that number holds steady.

Still, despite the better than feared third quarter results, earnings are still down 9.8% year-over-year due to the COVID-19 pandemic. If that 9.8% decline holds steady until all companies report earnings, it would represent the sharpest earnings decline since the third quarter of 2009, when earnings fell 15.8%, according to FactSet.

That may be the reason why investor reaction to the strong earnings beats have been muted. Strong earnings beats from large cap technology stocks and financial bank stocks have been met with a tepid reaction from investors, with many stocks selling-off despite earnings beats thanks to bleak outlooks or lowered future guidance.

“Companies that have reported positive earnings surprises for Q3 2020 have seen an average price decrease of -1.7% two days before the earnings release through two days after the earnings release,” FactSet highlighted.

This trend may continue into the fourth quarter, as analysts expect an earnings decline of 11.2%, according to FactSet. But investors can expect earnings growth to return in the first quarter of 2021 at a clip of 14.5%, FactSet said, citing aggregate analyst estimates.


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