Jan 6, 2020

S&P earnings expected to grow in Q4 for the first time since 2018

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Reproduced from FactSet; Chart: Axios Visuals

Given the way S&P 500 earnings have beaten estimates over the past few years it is likely the index will report earnings growth in the fourth quarter — the first and only quarter of growth last year.

Between the lines: John Butters, FactSet's senior earnings analyst, said in a note that on average nearly three-quarters of S&P 500 companies' actual earnings have exceeded estimates by about 5%.

  • "As a result, from the end of the quarter through the end of the earnings season, the earnings growth rate has typically increased by 3.6 percentage points on average (over the past five years) due to the number and magnitude of positive earnings surprises."

Therefore, Butters estimates, it's likely actual Q4 earnings will come in at around 2.1%.

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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.

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.

Go deeperArrowJan 23, 2020

The S&P 500 could be overvalued

The New York Stock Exchange on Jan. 8. Photo: Xinhua/Wang Ying via Getty Images

The S&P 500 is too rich on a number of levels, according to calculations in a new paper from Ned Davis Research that examines the index's price to earnings, profits and price to sales.

What's happening: Not only is the benchmark stock index's current P/E ratio "well above fair value," S&P companies' prices relative to sales is at a record high, “well in excess of what they were in 2000 or 2007 at those peaks,” Ned Davis, the company's senior investment strategist, says in a note to clients.

Go deeperArrowJan 9, 2020