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Are 2020 Earnings Forecasts Too High?

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Total earnings for the 447 S&P 500 members that have reported Q3 results through Monday, November 11th are down -1.7% from the same period last year on +4.3% higher revenues, with 72.5% beating EPS estimates and 57.9% beating revenue estimates.

This is weaker earnings growth relative to what we had seen from the same group of 447 index members in other recent periods, but revenue growth is about in-line with other recent periods, as the comparison charts below show.

At this stage, the Retail sector is the only that has a sizable number of Q3 reports still to come. To that end, Wal-Mart WMT becomes the first major operator to come out with results on November 14th.

For the quarter as a whole, combining the results that have come out with estimates for the still-to-come companies, total Q3 earnings are expected to be down -2% from the same period last year on +4.3% higher revenues.

The biggest declines are at the Energy and Basic Materials sectors, with earnings for these sectors down -34.8% and -28.5% from the same period last  year, respectively. Excluding the Energy sector drag, total Q3 earnings for the remainder of the index would be modestly in positive territory (up +0.1%).

Estimates for full-year 2020 have started coming down lately, with total earnings for the S&P 500 index expected to be up +8.5% on  +4.7% higher revenues. This would follow -1.4% decline on +2.5% higher revenues in 2019, as the chart below shows.

For a comprehensive review of the Q3 earnings season and expectations for the coming quarters, please check out our weekly Earnings Trends report >>>>> The Evolving Earnings Picture

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