Jan 23, 2020

S&P 500 companies expect declining earnings and profit margins for Q4

Reproduced from FactSet; Chart: Axios Visuals

S&P 500 companies are poised to see a 2.1% decline in earnings along with net profit margins of 10.7% , FactSet data show, based on reports from the companies that have so far reported their results from the fourth quarter of 2019.

Why it matters: Both numbers suggest overall weakness in 2019, analysts say.

What it means: "If 10.7% is the actual net profit margin for the quarter, it will mark the first time the index has reported four straight quarters of year-over-year declines in net profit margin since Q4 2008 through Q3 2009," FactSet senior earnings analyst John Butters writes.

  • "Eight of the 11 sectors are reporting a year-over-year decline in their net profit margins in Q4 2019, led by the Energy (4.7% vs. 7.4%), Information Technology (21.4% vs. 22.7%), and Consumer Discretionary (5.9% vs. 7.0%) sectors."

Go deeper: The S&P 500 could be overvalued

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Earnings on pace for a strong rebound

Data: FactSet; Chart: Axios Visuals

Thanks to a cadre of better-than-expected earnings results from the companies that have reported their fourth-quarter earnings so far, the earnings growth rate for the S&P 500 has risen to 0.7%.

Why it matters: That is a far cry from the estimated earnings decline of -1.7% at the end of the quarter. If it holds, this would mark the first time the index has reported year-over-year growth in earnings since Q4 2018. 

S&P 500 earnings on pace for 4th straight negative quarter

Traders at the New York Stock Exchange on Jan. 8. Photo: Wang Ying/Xinhua via Getty) (Xinhua/Wang Ying via Getty Images

Strong earnings reports from buzzy tech companies like Amazon and Microsoft have dominated headlines, but the numbers for the broader market remain negative.

What's happening: With 45% of S&P 500 having reported earnings, FactSet estimates an overall earnings decline of 0.3% for the quarter.

A stronger Tesla returns to the spotlight for Q4 earnings

Photo: Justin Sullivan/Getty Images

Tesla's Q4 earnings report will come Wednesday as the volatile Silicon Valley electric automaker's stock is near all-time highs with a recent run of positive news, including record 2019 deliveries and the recent launch of its Chinese factory.

Why it matters: Tesla is arguably the most important corporate actor in the movement of electric vehicles toward the mainstream, even as new manufacturers emerge and legacy automakers roll out new models.

Go deeperArrowJan 29, 2020