For most folks, earnings season means the 4 to 6 week period at the end of each calendar quarter when announcements of quarterly earnings releases dominate market headlines. For folks like us, however, who have to monitor and record each and every earnings release, the definition and duration of each earnings season isn’t that simple. Take for example, the 161 companies coming out with quarterly results this week, including 4 S&P 500 members.

Since we are still a couple of weeks away from the end of the March quarter, most folks would assume that all of these reports represent the tail of the 2016 Q4 earnings season. But that’s not correct; not all of this week’s earnings releases fall in the Q4 bucket. In fact, a number of this week’s earnings releases form part of the Q1 earnings season. For example, the Oracle (ORCL Quick QuoteORCL - Free Report) report after the market’s close on Wednesday is for that company’s fiscal quarter that ended in February, which will form part of our Q1 earnings tally. The Adobe (ADBE Quick QuoteADBE - Free Report) report after the close on Thursday similarly becomes part of the Q1 bucket.

That said, most of this week’s 161 earnings releases do represent the tail of the Q4 reporting cycle. The chart below of weekly reporting calendar for the S&P 500 index clearly shows that we still have another four weeks to go before the Q1 earnings season really takes off.

Expectations for Q1

Total Q1 earnings are expected to be up +6.6% from the same period last year on +6.5% higher revenues. This would follow +7.4% earnings growth in 2016 Q4 on +3.7% revenue growth, the highest growth pace in all most two years.

Estimates for Q1 came down as the quarter unfolded, with the current +6.6% growth down from +10.4% at the end of December. The chart below shows how Q1 earnings growth expectations have evolved over the last three months.

Please note that while Q1 estimates have followed well traversed path that we have been seeing consistently over the last few years, the magnitude of negative revisions compares favorably to other periods. In other words, Q1 estimates have come down, but they haven’t come down by as much.

The table below shows the summary picture for Q1, contrasted with what was actually achieved in Q4 (please note that we have officially closed the books on Q4 yet, as 4 index members still have to report quarterly results).

Recap of the Q4 Earnings Season

We now have Q4 results from 495 S&P 500 members, or 99% of the index’s total membership. Total earnings for these 495 index members are up +7.5% on +4.8% higher revenues, with 68.5% beating EPS estimates and 54.5% coming ahead of top-line expectations. For the quarter as a whole (combining estimates for the still-to-come 4 index members with what has come out already), total Q4 earnings are on track to be up +7.4% from the same period last year on +3.7% higher revenues.

Any way you look at it, the Q4 earnings season turned out to be a good one. Not only has growth turned out to be the highest in two years, but total earnings for the quarter also reached 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 wasn’t a result of easy comparisons, but actually a function of strong gains in 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.

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 market is reflecting this improved earnings backdrop as the chart below of the S&P 500 relative to forward 12-month Zacks Consensus estimates shows.

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, click here>>>

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Here is a list of the 161 companies including 4 S&P 500 members reporting this week.