Every quarterly earnings season gives us fresh insights into the evolving corporate profitability picture. The Q4 earnings season is particularly important in this respect as it will give us a good read on how management teams are thinking of the economy’s health.

The Financials, which dominate the initial reports, largely come out with good-enough results with no material negative surprises. While the expected Fed rate cuts will likely have a bearing on banks’ net interest earnings this year, all of the banks had reassuring things to say about the state of the consumer and household financials. Delinquency rates are rising, but from a historically low level and still very much within the normal range.

It is still early in the Q4 reporting cycle, with results from only 43 S&P 500 members out, through Thursday January 18^th. Companies appear to be easily beating EPS estimates, but struggling with doing the same on the revenues side. We had noticed some of this divergence in the preceding earnings season as well, but it appears to be more pronounced at this stage in the Q4 earnings season.

With respect to the revisions trend, estimates had started coming down at an above-average pace earlier in the quarter, but have stabilized in recent weeks. We would expect management guidance to drive how the revisions trend for 2024 Q1 and full-year 2024 evolves as the bulk of the Q4 earnings season unfolds in the coming days and weeks.

Please check our weekly Earnings Trends report to get a detailed look at the Q4 earnings season and expectations for the coming periods here >>>Q3 Earnings Season Kicks-off Positively