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One standout feature of the Q3 earnings season is the strong momentum emerging on the revenue front. What this means is that not only is revenue growth accelerating from other recent periods, but an above-average proportion of companies are beating top-line estimates.

Including all of this morning’s results, we now have Q3 results from 229 S&P 500 members that combined account for  48.1% of the index’s total market capitalization. Total earnings for these companies are up +7.7% from the same period last year on +5% higher revenues, with 75.5% beating EPS estimates and 65.1% beating revenue estimates.

The comparison charts below show these Q3 results in a historical context, with the earnings growth rate for these 229 index members tracking below what we had seen from the same group of companies in the preceding quarter. The Q3 earnings growth pace is nevertheless is tracking above the 4- and 12-quarter averages.

Unlike the mixed earnings comparison, the comparison on the revenue front is unequivocally favorable, as mentioned earlier and the charts below prove.

Looking at Q3 as a whole, combining the actual results from the 229 index members with estimates from the still-to-come 271 companies, total Q3 earnings are expected to be up +4.1% from the same period last year on +5.2% higher revenues.

While the Q3 earnings growth pace is below what we had seen in the first two quarters of the year, the overall level of total earnings for the S&P 500 index is on track to reach a new quarterly record, surpassing the record reached in the preceding quarter. But as the chart below shows, this record isn’t expected  to last much longer as the current and coming quarters are expected to surpass even this lofty level.

This favorable earnings picture emerging from the Q3 earnings season is no doubt reconfirming the narrative of improving earnings that has been in place over the last few quarters and that has been a big source of support for the market. Positive earnings, however, do not offset the valuation question about the market.

Relative to forward 12-month consensus EPS estimates, the market is trading at multi-year highs for all the major indexes. You can see in this chart below that shows the 10-year valuation history for the S&P 500 and Russell 2000  indexes.

We should keep in mind however that while valuation levels remain stretched, they aren’t in the ‘bubbly’ levels of the late-1990’s. Importantly, in the current environment of favorable global growth and still low interests, it is hard to call stocks overly expensive.

For more details about the ongoing Q3 earnings season, please check out our weekly Earnings Trends report.

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