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The earnings picture has been weighed down by headwinds like inflation, supply-chain bottlenecks and macroeconomic uncertainty over the last few quarters and these factors are very much at play in the ongoing Q3 earnings season as well.
Over the last few weeks, many in the market feared a major reset in the earnings outlook as a result of this earnings season, with companies across the board guiding lower in response to the afforementioned headwinds.
We are not seeing that in the earnings reports that have come out already.
Including all of this morning’s releases, we now have Q3 results for 88 S&P 500 members or 17.6% of the index’s total membership. Total earnings for these companies are down -4.2% from the same period last year on +7.4% higher revenues, with 77.3% beating EPS estimates and 64.8% beating revenue estimates.
The earnings and revenue growth for this group of 88 index members is about in-line with what we saw from this group of companies in the first half of the year.
The comparison charts below put the EPS and revenue beats % for these 88 index members in a historical context.
Image Source: Zacks Investment Research
Contrary to pre-season fears of this earnings season prompting a lower reset for expectations, the tone and substance of management guidance has been good enough; not great, but not bad either.
We have had some companies guide lower, but the trend has hardly been widespread, at least at this stage. In fact, a number of the big banks like Bank of America (BAC - Free Report) and JPMorgan (JPM - Free Report) provided reassuring commentary about what they see in the current period.
Estimates have been coming down already, both for 2022 Q4 and full-year 2023, and the trend will likely continue in the coming days as we enter the heart of the Q3 earnings season. As we have been pointing out all along, the narrative that estimates are out of line with the economic ground reality is erroneous as it doesn’t account for unusual profitability drivers of the Energy sector. Excluding the Energy sector, 2023 estimates have come down more than -7% since peaking in April.
For more details about the Q3 earnings season and the overall earnings picture, please check out our weekly Earnings Trends report >>>>> Earnings Picture is Good Enough, So Far
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How Critical Is This Earnings Season?
The earnings picture has been weighed down by headwinds like inflation, supply-chain bottlenecks and macroeconomic uncertainty over the last few quarters and these factors are very much at play in the ongoing Q3 earnings season as well.
Over the last few weeks, many in the market feared a major reset in the earnings outlook as a result of this earnings season, with companies across the board guiding lower in response to the afforementioned headwinds.
We are not seeing that in the earnings reports that have come out already.
Including all of this morning’s releases, we now have Q3 results for 88 S&P 500 members or 17.6% of the index’s total membership. Total earnings for these companies are down -4.2% from the same period last year on +7.4% higher revenues, with 77.3% beating EPS estimates and 64.8% beating revenue estimates.
The earnings and revenue growth for this group of 88 index members is about in-line with what we saw from this group of companies in the first half of the year.
The comparison charts below put the EPS and revenue beats % for these 88 index members in a historical context.
Image Source: Zacks Investment Research
Contrary to pre-season fears of this earnings season prompting a lower reset for expectations, the tone and substance of management guidance has been good enough; not great, but not bad either.
We have had some companies guide lower, but the trend has hardly been widespread, at least at this stage. In fact, a number of the big banks like Bank of America (BAC - Free Report) and JPMorgan (JPM - Free Report) provided reassuring commentary about what they see in the current period.
Estimates have been coming down already, both for 2022 Q4 and full-year 2023, and the trend will likely continue in the coming days as we enter the heart of the Q3 earnings season. As we have been pointing out all along, the narrative that estimates are out of line with the economic ground reality is erroneous as it doesn’t account for unusual profitability drivers of the Energy sector. Excluding the Energy sector, 2023 estimates have come down more than -7% since peaking in April.
For more details about the Q3 earnings season and the overall earnings picture, please check out our weekly Earnings Trends report >>>>> Earnings Picture is Good Enough, So Far