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Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
We are off to a good start in the Q4 earnings season, with an above-average proportion of companies beating EPS estimates. On the flip side, companies appear to be struggling to beat revenue estimates.
Total Q4 earnings for the 36 S&P 500 members that have reported results are up +4.2% from the same period last year on +5.4% higher revenues, with 86.1% beating EPS estimates and 55.6% beating revenue estimates.
The revenue growth pace for this group of index members represents a deceleration relative to what we had seen from the group in other recent periods, while the 55.6% revenue beats percentage is a new 20-quarter low for this group of 36 index members.
For the Technology sector, total Q4 earnings are expected to be up +18.7% from the same period last year on +6.6% higher revenues. Had it not been for the strong Tech sector contribution, Q4 earnings for the remainder of the index would be down -6.4% (instead of up +0.2% as a whole).
While Citigroup (C - Free Report) beat both EPS and revenue estimates, JPMorgan (JPM - Free Report) and Bank of America (BAC - Free Report) followed the emerging trend at this early stage in the Q4 reporting cycle of easily beating EPS estimates but coming up short concerning top-line estimates.
It may be premature to draw any firm conclusions from the 36 S&P 500 members, or a little over 7% of the index’s total membership, that have reported December-quarter results at this stage. But the disparity between earnings and revenue performance is fairly pronounced, at least at this stage.
As noted earlier, we are off to a good start, with an above-average proportion of these companies beating EPS estimates. In fact, the 86.1% EPS beats percentage is notably above the 20-quarter average for this group of 36 index members of 80.6%. The earnings growth pace for this group of companies is also comparable to what we had seen from this group of companies in other recent quarters.
The Q4 performance picture isn’t that reassuring on the revenues side, with the growth pace for these 36 index members showing a decelerating trend and the revenue beats percentage the lowest in the preceding 20-quarter period, as you can see in the comparison charts below.
Image Source: Zacks Investment Research
We have noted some degree of revenue weakness in the preceding reporting cycle as well, though the magnitude of revenue underperformance this time around appears more pronounced. That’s assuming the current trend is for real and not reflective of an unrepresentative sample.
Perhaps disinflation is at work in producing this revenue trend.
Beyond the results that have come out, total Q4 earnings are currently expected to be +0.2% above the year-earlier period on +2.2% higher revenues. This would follow the +3.8% increase in index earnings in 2023 Q3 on +2.0% higher revenues.
The chart below shows the overall earnings picture on a quarterly basis.
Image Source: Zacks Investment Research
As you can see from these quarterly earnings-growth expectations, the growth picture is expected to steadily improve over the next few quarters.
Below, we show the overall earnings picture for the S&P 500 index on an annual basis.
Image Source: Zacks Investment Research
Given the expected moderation in the U.S. economy’s growth trajectory due to the cumulative effects of Fed tightening, these estimates likely need to come down. Some of that downward adjustment is already happening, as seen in the chart below.
Image Source: Zacks Investment Research
As we have noted before, full-year 2024 estimates started coming down in October, with the trend continuing in November and early December, but appear to have stabilized in recent weeks.
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Q4 Earnings Season Kicks Off Positively
Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
While Citigroup (C - Free Report) beat both EPS and revenue estimates, JPMorgan (JPM - Free Report) and Bank of America (BAC - Free Report) followed the emerging trend at this early stage in the Q4 reporting cycle of easily beating EPS estimates but coming up short concerning top-line estimates.
It may be premature to draw any firm conclusions from the 36 S&P 500 members, or a little over 7% of the index’s total membership, that have reported December-quarter results at this stage. But the disparity between earnings and revenue performance is fairly pronounced, at least at this stage.
As noted earlier, we are off to a good start, with an above-average proportion of these companies beating EPS estimates. In fact, the 86.1% EPS beats percentage is notably above the 20-quarter average for this group of 36 index members of 80.6%. The earnings growth pace for this group of companies is also comparable to what we had seen from this group of companies in other recent quarters.
The Q4 performance picture isn’t that reassuring on the revenues side, with the growth pace for these 36 index members showing a decelerating trend and the revenue beats percentage the lowest in the preceding 20-quarter period, as you can see in the comparison charts below.
Image Source: Zacks Investment Research
We have noted some degree of revenue weakness in the preceding reporting cycle as well, though the magnitude of revenue underperformance this time around appears more pronounced. That’s assuming the current trend is for real and not reflective of an unrepresentative sample.
Perhaps disinflation is at work in producing this revenue trend.
Beyond the results that have come out, total Q4 earnings are currently expected to be +0.2% above the year-earlier period on +2.2% higher revenues. This would follow the +3.8% increase in index earnings in 2023 Q3 on +2.0% higher revenues.
The chart below shows the overall earnings picture on a quarterly basis.
Image Source: Zacks Investment Research
As you can see from these quarterly earnings-growth expectations, the growth picture is expected to steadily improve over the next few quarters.
Below, we show the overall earnings picture for the S&P 500 index on an annual basis.
Image Source: Zacks Investment Research
Given the expected moderation in the U.S. economy’s growth trajectory due to the cumulative effects of Fed tightening, these estimates likely need to come down. Some of that downward adjustment is already happening, as seen in the chart below.
Image Source: Zacks Investment Research
As we have noted before, full-year 2024 estimates started coming down in October, with the trend continuing in November and early December, but appear to have stabilized in recent weeks.