Q3 Earnings Trends Are Improving: S&P Capital IQ

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Going into the third quarter earnings reporting season, analysts were extremely cautious, but as the season dragged on, things started looking up. Earnings for the S&P 500 Index are still down on a year over year basis, but they’ve improved by 360 basis points since the beginning of earnings season, according to S&P Capital IQ.

Earnings beat rate below average again

Senior Analyst Lindsey Bell released her latest update on the third quarter earnings reporting season. She reports that of the 465 companies in the S&P that have reported so far, 301 have beat expectations, while 98 have missed and 66 reported results that were in line with estimates. This represents a 65% beat rate, which is just under the average beat rate of 66%.

Bell reports that so far, seven of the ten sectors in the S&P 500 are showing growth from the third quarter. Consumer Discretionary, Healthcare, and Telecommunications lead the way. Energy continues to be a huge weight on earnings with a 58.6% decline expected.


Excluding the drag from the Energy sector, the earnings per share growth for the S&P 500 Index would be 6.6% for the third quarter, as we stand. Here’s a look at earnings per share estimates by sector for the S&P 500:


Consumer Discretionary rebounds, Consumer Staples slides

Here’s a look at the historical trends of estimates for the third and fourth quarters from throughout the year.


At the beginning of October, analysts were expecting an increase in earnings from the Consumer Discretionary Sector, but not as big of an increase as what we’re seeing now. You’ll notice that the trend is reversed for the fourth quarter. The Consumer Staples sector continues to slide, but the decline isn’t turning out to be as bad as what was expected at the beginning of October. Utilities is expected to fall into the red for the fourth quarter, and earnings growth in Healthcare and Industrials is expected to slow in the fourth quarter.

For the S&P 500 as a whole, analysts were expecting a large 4.75% decline for the third quarter, but that has since narrowed to 1.57%. Meanwhile they have worsened their outlook for the index in the fourth quarter from their Oct. 1 estimate of a 0.45% decline to the 3.76% decline in earnings they are now expecting for the fourth quarter.

And here’s a look at the first and second quarters for next year:


And for the full year:


Retail earnings disappoint

Nordstrom’s latest earnings report was so bad it sent shares into a nosedive on Friday. Fossil’s earnings report also disappointed. And the bad news for the Retail sector continues as the October retail sales number released today also demonstrates weakness. Further, the Retail Index traded down 2.5% in morning trading on Friday.

Next week Retail continues to be the focus of the handful of earnings reports we have yet to come. Wal-Mart, Home Depot, Target, Keurig Green Mountain, and Salesforce are among the 18 companies that are scheduled to report next week.

All graphs and charts in this article are courtesy S&P Capital IQ.

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