As we continue along through fourth quarter earnings season, the results thus far have not been as positive as previously hoped. Since October 2014, however, we have seen a steady decline in earnings per share consensus for the S&P 500. Overall earnings per share has fallen from around $31 to its current level of $28.33, from $29.31. After 25% of companies in the S&P 500 have reported, we have seen earnings per share come in 3% less than what was expected at the start of the quarter. A majority of the negative results have been caused by special charges, and Goldman Sachs sees this trend to continue throughout the rest of the fourth quarter earnings season. Additionally, companies are increasingly becoming wary of 2015 earnings results, which have seen some negative revisions, putting pressure on shares. This week in particular is big earnings week, in which 143 companies are set to release results and could potentially put pressure on the overall market.
Special Charges Hitting Overall S&P 500 EPS
As previously mentioned, special charges have largely caused havoc on earnings thus far for the fourth quarter. The revised overall earnings per share consensus for full year 2014 for the S&P 500 now sits at $115, which still represents a 7% growth from full year 2013 earnings, but it is not yet known if the consensus will continue to receive further revisions. Delta Airlines, for instance, reported a special charge of $1.4 billion due to mostly fuel hedging. Additionally, Verizon and AT&T’s potential pension charges are expected to negatively affect overall S&P 500 earnings per share by $1.59, according to Goldman Sachs.
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A big group of energy companies are expected to release earnings this week, such as ConocoPhillips, Occidental Petroleum Corporation, and Chevron Corporation. Goldman Sachs says the earnings will likely help provide investors will more updated insights into low oil’s impact on earnings and capital expenditures estimates for 2015. This is certainly going to be a widely watched earnings week for energy outlook.
Earnings and Revenue Surprises Thus Far Still Remain, But Dwindling
According to Goldman’s earnings and revenue result matrix, positive earnings surprises of the 90 companies that have reported so far still commands 48%. Companies that have reported earnings within estimates or “inline” comes in at 38% and 14% of companies reported have had negative earnings results for the fourth quarter. Revenue, on the other hand, has not had the same bullishness thus far. Just 30% of companies reported have had positive revenue releases, with 41% reporting inline with estimates and 29% that have reported revenue below estimates. The takeaway here is that about half of the companies reported have beat earnings expectations, but the majority have not beaten revenue estimates.
Overall, as mentioned previously, the week ahead represents about 36% of the overall S&P 500 in terms of companies set to report. After this week, we will likely have an even clearer picture as to what overall fourth quarter earnings per share will be for the S&P 500 and additionally, its full year 2014 earnings per share. Energy results will likely get a bulk of the attention, as investors look for expectations for oil for the rest of 2015.