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Has Earnings Growth Peaked Already?

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The market has been unforgiving of companies that miss consensus expectations, with negative surprises on the guidance front particularly producing major stock market reactions. We saw this companies like Caterpillar (CAT - Free Report) , Advanced Micro Devices (AMD - Free Report) and many others. Weak guidance feeds into the market’s worries about consensus expectations for the coming quarters that remain at risk of downward revisions given economic weakness in emerging economies and Europe, the impact of trade tariffs and the strong U.S. dollar. 

Including all of this morning’s releases, we now have Q3 results from 279 S&P 500 members or 55.8% of the index’s total membership. Total earnings for these companies are up +22.3% from the same period last year on +8.4% higher revenues, with 76.7% beating EPS estimates and 59.9% beating revenue estimates. The proportion of these 279 companies beating both EPS and revenue estimates is 50.5%.

While overall Q3 results are about in-line with historical periods, trends on the revenue front are on the weak side, as the charts below show.

You can see in the chart above that companies are finding it difficult to beat revenue estimates. In fact, the proportion of positive revenue surprises is the lowest since 2016 Q4.

For more details about the Q3 earnings season and the overall earnings picture, please check our weekly Earnings Preview report  >>>>  The Market’s Exaggerated Earnings Worries

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