The bulk of the Q4 earnings season is now behind us, with results from 358 S&P 500 members, or 71.6% of the index’s total membership, already out. With another 53 index members on deck to report results next week, we will have seen results from more than 80% of the index’s members by then.

This earnings season has turned out to be good one. Not only is growth on track to be the highest in two years, but total earnings for the quarter are also on track to be a new quarterly record.

Please recall that earnings growth turned positive only in 2016 Q3, having declined in each of the preceding 5 quarters, as the chart below of year-over-year earnings growth for the S&P 500 index shows.

Importantly, the positive Q4 growth isn’t a result of easy comparisons, but actually a function of strong gains in actual earnings. In fact, the overall tally of Q4 earnings for the S&P 500 index is on track to reach an all-time record for the index, surpassing the previous record achieved in 2014 Q4. The chart below shows the quarterly earnings totals for index, contrasting the highlighted Q4 tally with actual results from the last 8 quarters and expected tallies in the coming 4 quarters.

As you can see, this record isn’t expected to last very long, with growth expected to ramp up notably in the coming quarters.

One other positive for this earnings season is the relatively modest negative revisions to current-quarter (2017 Q1) estimates; they have come down, but not by as much as has historically been the case. The chart below shows evolution of Q1 estimates since the start of the period.

Q4 Scorecard (as of February 10, 2017)

We now have Q4 results from 358 S&P 500 members, or 71.6% of the index’s total membership. With 53 index members on deck to report results next week, we will have seen Q4 results from 80.2% of the index’s total membership by the end of next week. The notable reports this week include Cisco (CSCO Quick QuoteCSCO - Free Report) , Deere & Co. (DE Quick QuoteDE - Free Report) , Pepsi (PEP Quick QuotePEP - Free Report) , AIG (AIG Quick QuoteAIG - Free Report) and others.

Total earnings for these 358 index members are up +6.1% on +4.6% higher revenues, with 69% beating EPS estimates and 54.7% coming ahead of top-line expectations.

The table below provides the current Q4 scorecard

The charts below provide a comparison of the results thus far with what we have seen from this same group of 358 S&P 500 members in other recent periods.

As you can see, the Q4 growth pace is notably tracking above what we had seen from the same group of 358 index members in other recent periods. But positive surprises (right-hand chart above) are tracking on the low side relative to historical periods, particularly on the earnings front. The 69% proportion of Q4 companies beating EPS estimates compares to 75.1% in the preceding quarter, 74.1% as the 4-quarter average and 72.4% as the 12-quarter average. Positive revenue surprises are tracking below what we had seen from the same group of companies in Q3, but are roughly in-line with historical periods.

The chart below compares the proportion of companies reporting Q4 results that are beating both EPS and revenue estimates with what this same group of companies had reported in other recent periods.

Standout Sectors

Sectors with strong growth and better than expected results (earnings & revenues) include the Finance, Construction, Technology, Utilities, And Business Services. Positive surprises for all of these sectors are tracking above the index level.

Finance: With results from 79.9% of the sector’s market cap in the S&P 500 index already out, total earnings for the sector are up +11.8% from the same period last year on +5% higher revenues, with +73.3% beating EPS estimates and +56% beating top-line estimates.

This is better growth performance than we have seen from the sector in other recent periods, as the comparison charts below show. Please note that positive surprises are as hard to come by in the Finance sector as they are elsewhere.

Strong Finance sector growth is a big driver of the aggregate growth performance for the S&P 500 index as a whole. Excluding the Finance sector, the Q4 growth pace still compares favorably with other recent periods, but a lot less so, as the right-hand chart below shows.

Technology: For the Technology sector, we now have Q4 results from 88.6% of the sector’s total market cap. Total earnings for these companies are up +8.2% from the same period last year on +6% higher revenues, with 71.4% beating EPS estimates and 71.4% beating revenue estimates.

This is better earnings growth than we have seen from this same group of Tech companies in Q3 or the preceding four quarters, but is about in-line with the 12-quarter average. Revenue growth, on the other hand, is tracking above historical periods. The revenue outperformance is visible in terms of positive surprises as well, with the proportion of Tech sector positive surprises notably tracking above Q3, the 4-quarter and 12-quarter averages, as you can see in the right-hand side chart. Earnings surprises (green bards in the right-hand chart) are tracking below historical periods, as is the case with other sectors as well.

Q4 Expectations As a Whole

For Q4 as a whole, combining the actual results from the 358 S&P 500 members that have reported with estimates for the still-to-come 142 companies, total earnings are expected to be up +7.5% from the same period last year on +3.9% higher revenues. This would follow the +3.7% growth in Q3 earnings on +2.2% higher revenues, the first instance of positive earnings growth for the index after five quarters of back-to-back declines. Comparisons for the Energy sector, a big driver of the earnings recession, turn positive in Q4, with the sector’s earnings growth turning positive for the first time after 8 quarters of declines.

The chart below shows the Q3 earnings growth contrasted with declines in the preceding 5 quarters. As you can see in the chart below, the growth pace is expected to ramp up in 2017.

The table below shows the summary picture Q4 contrasted with what was actually achieved in the preceding quarter.

For a complete analysis of the Q4 earnings season, please check out our weekly Earnings Trends report - Positive Earnings Picture.

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here >>>

Here is a list of the 380 companies reporting this week, including 53 S&P 500 members.