It’s earnings season, which means companies are announcing their quarterly financial results.
Only 53 of the S&P 500 companies had announced their results through Friday.
“With 11% of the companies in the S&P 500 reporting actual results, the percentage of companies reporting earnings above estimates is well below the four-year average,” said FactSet’s John Butters.
Analysts expect to see average earnings growth of 5.9% during the quarter. But if the current pattern of disappointments turns out to be the trend, then actual growth could be much lower.
Here’s Butters with the status update:
Percentage of Companies Beating EPS Estimates (57%) Below 4-Year Average
Overall, 53 companies have reported earnings to date for the third quarter. Of these 53 companies, 57% have reported actual EPS above the mean EPS estimate and 43% have reported actual EPS below the mean EPS estimate. The percentage of companies reporting EPS above the mean EPS estimate is well below the 1-year (71%) average and the 4-year (73%) average.
At the sector level, the Health Care (100%) sector has the highest percentage of companies reporting earnings above estimates, while the Industrials (20%) sector has the lowest percentage of companies reporting earnings above estimates.
Low Earnings Surprise Percentage (2.2%)
In aggregate, companies are reporting earnings that are 2.2% above expectations. This surprise percentage is below the 1-year (3.3%) average and the 4-year (5.8%) average.
Companies in the Information Technology (+5.3%) are reporting the largest upside aggregate differences between actual earnings and estimated earnings. In this sector, companies that have reported actual EPS above estimates by the widest margins include Micron Technology (+61%) and Red Hat (+20%).
On the other hand, Companies in the Materials (-3.6%) and Industrials (-1.2%) sector are reporting the largest downside aggregate differences between actual earnings and estimated earnings. In the Materials sector, one company is mainly responsible for the high surprise percentage for the sector: Alcoa. The company reported actual EPS of $US0.04 for the fourth quarter, relative to the mean EPS estimate of $US0.06. In the Industrials sector, companies that have reported actual EPS below the mean EPS estimates by the widest margins include FedEx (-4%), Fastenal (-4%), and CSX Corporation (-3%).
Goldman Sachs’ Amanda Schneider charted the rate of positive surprises and negative surprises. As you can see, the pattern is not great.