S&P 500 Q4 earnings – There’s no denying that companies were hit hard during the fourth quarter, and we are definitely heading for a year over year earnings decline for the S&P 500. However, earnings estimates are finally improving; they’re up 140 basis points from where they bottomed out on Jan. 27, according to data from S&P Capital IQ.
Another bit of good news is that now half of the S&P’s ten sectors are expected to be in the green as Information Technology now looks on track for a very slight earnings increase.
Q4 earnings season passes its peak
Senior Analyst Lindsey Bell reports today that the aggregate fourth quarter estimates now stand at $29.06 (as of Friday), which is a 4.9% year over year decline. One week ago, the estimate stood at $28.99, representing a 5.11% decline year over year, although it was still an improvement of 119 basis points from Jan. 27.
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Usually as a quarterly reporting period goes on, earnings estimates improve, but with the fourth quarter, it has taken bit longer than usual. However, we have finally moved past the peak of the fourth quarter season and are starting to move into the tail end, which typically is dominated by retailers. Wal-Mart kicks the reporting off for the Retail sector next week.
Q4 earnings – Five S&P 500 sectors expected to see positive growth
Another big shift that’s happened this week is that we can now add a fifth sector to the list of those expected to post positive growth from the fourth quarter. Since the fourth quarter reporting season kicked off in early January, analysts have been saying that just four of the sectors in the S&P 500 saw positive earnings growth during the last quarter of the year.
However, on Thursday, the Information Technology sector flipped over to the positive side, reports Bell. Today analysts are predicting a miniscule 0.08% increase for the sector, which is just enough to put it on the positive side.
Telecommunications is leading the way in growth estimates, while Energy is the biggest laggard (no surprise here). Excluding the drag from the Energy sector, the S&P 500’s earnings would have grown 1.6% in the fourth quarter, current estimates suggest. Here’s a look at the current earnings standings by sector:
Q4 earnings beat rate in line with average
Bell reports that 249 of the 376 companies in the index which have reported so far have beat Wall Street’s estimates, while 55 posted in-line results and 72 missed. This represents a 66% beat rate, which is right in line with the historic average.
Return to earnings growth expected in Q3
Analysts have gradually been pushing their expectations for a return to earnings growth for the S&P 500 further and further out. Now they’re not expecting growth to return until the third quarter. Here’s a look at the development of estimates for the next three quarters.