So far, 66 percent of the companies in the S&P 500 have reported their Q4 earnings. Let’s take a look at the key takeaways,
- So far, 71 percent of the companies that reported actual results, reported better than expected earnings. Only 29 percent of the companies reported worse than estimated earnings. Average earnings growth rate so far is 12.1 percent, which is lower than 25.7 percent reported last quarter but the fifth double-digit earnings growth. It is down from 12.4 percent last week. After the quarter, S&P500 companies had forecasted 12.2 percent growth. So far, 6 sectors have higher growth than the estimate.
- Earnings surprise percentage is at +4 percent, which is below the 5-year average of +4.8 percent and below the 1-year average of +6 percent.
- At the sector level, the Communications service (88 percent), Information Technology (83 percent), Industrials (86 percent), sectors have the highest percentages of companies reporting earnings above estimates, while the Utilities (29 percent) & Real Estate (29 percent) sectors have the lowest percentage of companies reporting earnings above estimates.
- 62 percent of the companies reported higher sales than estimated, so far. The sales growth rate is at 7 percent, which is higher than 6.6 percent reported last week but lower than 9.3 percent reported last quarter.
- At the sector level, the Health Care (87 percent) sector has the highest percentages of companies reporting revenues above estimates, while the Materials (20 percent) sector has the lowest percentage of companies reporting revenues above estimates.
Q4 2018/Q1, Q2 2019 forecast:
- For Q1 2019, analysts are projecting earnings decline of -1.7 percent and revenue growth of 5.4 percent.
- For Q2 2019, analysts are projecting earnings growth of 1.2 percent and revenue growth of 4.7 percent.
- For Q3 2019, analysts are projecting earnings growth of 2.5 percent and revenue growth of 4.5 percent.
- For Q4 2019, analysts are projecting earnings growth of 9 percent and revenue growth of 5 percent.
The current forward 12-month P/E ratio for the S&P 500 is at 15.8, below the 5-year average of 16.4 and higher than the 10-year average of 14.6
Better than expected earnings in 2017/18 have pushed all three, S&P 500, Dow Jones Industrial Average, and NASDAQ to all-time highs, but things have not gone well since the second half of 2018. S&P 500 is currently trading at 2708, while DOW is at 25106 and NASDAQ at 7298.