By John Butters, Senior Earnings Analyst, FactSet
The blended (combines actual results for companies that have reported and estimated results for companies yet to report) earnings growth rate for the S&P 500 is 1.6%, which is above the year-over-year blended decline of -0.5% at the end of last week and the year-over-year estimated decline of -2.2% at the end of the third quarter (September 30). If the index reports growth in earnings for the quarter, it will mark the first time the index has seen year-over-year growth in earnings since Q1 2015 (0.5%).
It is not surprising that the earnings growth rate for the third quarter turned positive during this earnings season. For more details, see our report from October 7.
Related: Apple Detracts from S&P 500 Tech Sector Growth Again in Q3
What is driving the increase in the earnings growth rate for the quarter? In aggregate, the upside earnings surprises reported by S&P 500 companies to date have led to a $10.1 billion increase in earnings for the index since September 30 (as higher actual earnings replace estimated earnings in the growth rate calculation). At the sector level, all 11 sectors have contributed to this increase in earnings. However, the Financials sector has been the largest contributor of all 11 sectors to the rise in earnings growth for the index since the end of the third quarter. This sector accounts for $3.6 billion (or 36%) of the $10.1 billion increase in earnings for the S&P 500 since September 30.
Financials, Information Technology Surprise
[drizzle]In the Financials sector to date, 87% of companies have reported actual EPS above estimated EPS, which is tied for the second highest percentage (with the Information Technology sector) of all 11 sectors. Companies in this sector are reporting earnings in aggregate that are 9.1% above estimates, which is the fourth highest surprise percentage of all 11 sectors.
The upside earnings surprises reported by Bank of America ($0.41 vs. $0.34), JPMorgan Chase ($1.58 vs. $1.39), Goldman Sachs ($4.88 vs. $3.82), Morgan Stanley ($0.81 vs. $0.63), American Express ($1.24 vs. $0.97), and Citigroup ($1.24 vs. $1.15) were all substantial contributors to the overall increase in earnings growth for the index since September 30. As a result, the blended earnings growth rate for the Financials sector has increased to 8.0% from 0.2% during this period. This is the second highest percentage point increase in earnings growth of all 11 sectors since September 30.
Read more about earnings trends in this edition of FactSet Earnings Insight. Visit www.factset.com/earningsinsight to launch the latest report.
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