Third quarter earnings season is winding down, with 446 of the companies in the S&P 500 Index having reported. Next week retail becomes the focus with Macy’s, Kohl’s, Nordstrom, and other major retailers reporting. Also on tap are results from Cisco Systems, MannKind, Sotheby’s, DISH Network, Sunedison, and Vodafone.
S&P 500 earnings have improved
S&P Capital IQ Senior Analyst Lindsey Bell reports in her daily earnings season update that aggregate for earnings in the S&P 500 are at $29.67 per share, which is a 1.29% year over year decline. It’s also an improvement of 388 basis points from the beginning of the season, which means things are looking up for the equities market. Here’s a look at where earnings per share stand by sector.
The LF Brook Absolute Return Fund lost -2.52% in the second quarter of 2021, compared to a positive performance of 7.59% for its benchmark, the MSCI Daily TR Net World Index. Year-to-date the fund has returned 4.6% compared to 11.9% for its benchmark. Q2 2021 hedge fund letters, conferences and more According to a copy Read More
Seven of the ten sectors in the index are showing earnings growth for the third quarter. Consumer Discretionary, Healthcare and Telecommunications are leading the way.
As you can see from the chart, earnings expectations for Consumer Discretionary and Healthcare declined throughout the year but then rebounded in the third quarter. Expectations for the Telecommunications sector have been rising steadily throughout the year.
Energy continues to weigh on earnings
Also the Energy sector continues to be a heavy weight on the S&P 500 with a 57.2% decline. Expectations for Energy plunged between January and April and fell even further through October before bouncing in the current quarter, remaining at a huge decline but slightly better than what was expected at the beginning of October.
The Materials and Consumer Staples sectors are also seeing projected declines, but not anywhere near as severe as the Energy Sector. Excluding the drag from Energy, earnings in the S&P 500 would have increased 6.4% during the third quarter.
Here’s a look at the development of expectations for fourth quarter earnings throughout the year:
Earnings beat rate falls below average
According to Bell, 291 of the 446 S&P 500 companies that have reported have beat Wall Street’s estimates. Ninety-two of them missed, and 63 reported results that were in line with expectations. This brings the beat rate to 65%, which is just slightly below the average beat rate of 66%. Here’s a look at the earnings and revenue mixes for beats and misses:
Currently the S&P 500 is trading at a multiple of 17.1 times on a forward 12-month price to earnings ratio. That’s higher than the average of 16 times the 15-year average.
All charts and graphs in this article are courtesy S&P Capital IQ.