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We get into the heart of the Q4 earnings season this week, with more than 225 companies reporting results, including 71 S&P 500 members from various sectors and industries. By the end of this week, we will have seen Q4 results from almost a quarter of all S&P 500 members.
The picture emerging from the Q4 earnings season thus far has been good enough; not great, but definitely not bad, either. Even the one area that we saw as somewhat problematic in the earlier set of reports about performance on the revenues side has since become fairly normal.
Given where we are in the economic cycle, we see the absence of any new negatives on the earnings front as a net favorable and reassuring development on the earnings front.
In terms of the Q4 scorecard, we now have results from 52 S&P 500 members, or 10.4% of the index’s total membership. Total earnings for these 52 index members are up +1.4% from the same period last year on +4.8% higher revenues, with 80.8% beating EPS estimates and 63.5% beating revenue estimates.
The comparison charts below put the Q4 earnings and revenue growth rates in a historical context.
Image Source: Zacks Investment Research
The comparison charts below put the Q4 EPS and revenue beats percentages in a historical context.
Image Source: Zacks Investment Research
As you can see above, the Q4 EPS and revenue beats percentages are within historical ranges. The revenue beats percentage was tracking unusually low at the start of this reporting cycle but has now moved into a more ‘normal’ range.
Perhaps a big part of the initial weakness in the revenue beats percentage resulted from weak performance from the Finance sector on this count.
For the Finance sector, we now have Q4 results from 39.8% of the sector’s market capitalization in the S&P 500 index. Total Q4 earnings for these Finance companies are down -2.4% from the same period last year on +1.1% higher revenues, with 75% beating EPS estimates and 62.5% beating revenue estimates.
Excluding the Finance sector drag, Q4 earnings for the rest of the S&P 500 companies that have reported results would be up +9% on +7% higher revenues. The comparison chart below puts the Q4 ex-Finance earnings growth rate in a historical context.
Image Source: Zacks Investment Research
As you can see here, the earnings growth pace outside of the Finance sector has accelerated. With many more companies outside the Finance sector on deck to report results this week, we will see if this improving growth trend will remain in place in the days ahead.
The chart below shows the earnings and revenue growth rates actually achieved in the preceding four quarters and current earnings and revenue growth expectations for the S&P 500 index for 2023 Q4 and the following three quarters.
Image Source: Zacks Investment Research
As you can see here, 2022 Q4 earnings are expected to be up +0.3% on +2.2% higher revenues. This follows the +3.8% earnings growth reading we saw in the preceding period (2023 Q3) and three back-to-back quarters of declining earnings prior to that.
The chart below shows the earnings picture on an annual basis.
Image Source: Zacks Investment Research
We did see a period of significant negative estimate revisions that started in April 2022 and lasted for about a year. During that period, estimates in the aggregate declined by about -15% from peak to trough, with the magnitude of negative revisions for several sectors exceeding -20%. These included Construction, Consumer Discretionary, Technology, and Retail.
The revisions trend stabilized in April 2023, with earnings estimates for a number of major sectors, including the Tech sector, starting to go up again. This favorable revisions trend continued until October 2023, when estimates started easing all over again.
The current reading on the revisions trend is that they appear to have stabilized again, as you can see in the chart below that shows how the aggregate bottom-up earnings total for 2024 has evolved lately.
Image Source: Zacks Investment Research
One sector whose earnings outlook appears to have notably turned around is the Tech sector. This sector has a bigger bearing on the aggregate earnings picture than any of the 15 Zacks sectors in the S&P 500 index, as it is on track to bring in more than 28% of the index’s total earnings over the coming four-quarter period.
You can see the recent uptrend in Tech sector estimates in the chart below, which shows the aggregate 2024 earnings estimates for the sector.
Image Source: Zacks Investment Research
With many Tech sector companies starting to report Q4 results this week, we would expect more movement here in the days ahead.
Other sectors whose 2024 earnings estimates also appear to have inched up lately include Retail, Autos, Aerospace, and Utilities.
While estimates for all the other sectors are still under pressure, sectors facing the most pressure on estimates include Transportation, Industrial Products, and Consumer Discretionary.
For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>>Q4 Earnings Season Kicks off Positively
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Q4 Earnings Results Reflect Stability
We get into the heart of the Q4 earnings season this week, with more than 225 companies reporting results, including 71 S&P 500 members from various sectors and industries. By the end of this week, we will have seen Q4 results from almost a quarter of all S&P 500 members.
The picture emerging from the Q4 earnings season thus far has been good enough; not great, but definitely not bad, either. Even the one area that we saw as somewhat problematic in the earlier set of reports about performance on the revenues side has since become fairly normal.
Given where we are in the economic cycle, we see the absence of any new negatives on the earnings front as a net favorable and reassuring development on the earnings front.
In terms of the Q4 scorecard, we now have results from 52 S&P 500 members, or 10.4% of the index’s total membership. Total earnings for these 52 index members are up +1.4% from the same period last year on +4.8% higher revenues, with 80.8% beating EPS estimates and 63.5% beating revenue estimates.
The comparison charts below put the Q4 earnings and revenue growth rates in a historical context.
Image Source: Zacks Investment Research
The comparison charts below put the Q4 EPS and revenue beats percentages in a historical context.
Image Source: Zacks Investment Research
As you can see above, the Q4 EPS and revenue beats percentages are within historical ranges. The revenue beats percentage was tracking unusually low at the start of this reporting cycle but has now moved into a more ‘normal’ range.
Perhaps a big part of the initial weakness in the revenue beats percentage resulted from weak performance from the Finance sector on this count.
For the Finance sector, we now have Q4 results from 39.8% of the sector’s market capitalization in the S&P 500 index. Total Q4 earnings for these Finance companies are down -2.4% from the same period last year on +1.1% higher revenues, with 75% beating EPS estimates and 62.5% beating revenue estimates.
Excluding the Finance sector drag, Q4 earnings for the rest of the S&P 500 companies that have reported results would be up +9% on +7% higher revenues. The comparison chart below puts the Q4 ex-Finance earnings growth rate in a historical context.
Image Source: Zacks Investment Research
As you can see here, the earnings growth pace outside of the Finance sector has accelerated. With many more companies outside the Finance sector on deck to report results this week, we will see if this improving growth trend will remain in place in the days ahead.
The notable companies reporting results this week include Tesla (TSLA - Free Report) , Netflix (NFLX - Free Report) , Johnson & Johnson (JNJ - Free Report) , Intel (INTC - Free Report) , and many others.
The Earnings Big Picture
The chart below shows the earnings and revenue growth rates actually achieved in the preceding four quarters and current earnings and revenue growth expectations for the S&P 500 index for 2023 Q4 and the following three quarters.
Image Source: Zacks Investment Research
As you can see here, 2022 Q4 earnings are expected to be up +0.3% on +2.2% higher revenues. This follows the +3.8% earnings growth reading we saw in the preceding period (2023 Q3) and three back-to-back quarters of declining earnings prior to that.
The chart below shows the earnings picture on an annual basis.
Image Source: Zacks Investment Research
We did see a period of significant negative estimate revisions that started in April 2022 and lasted for about a year. During that period, estimates in the aggregate declined by about -15% from peak to trough, with the magnitude of negative revisions for several sectors exceeding -20%. These included Construction, Consumer Discretionary, Technology, and Retail.
The revisions trend stabilized in April 2023, with earnings estimates for a number of major sectors, including the Tech sector, starting to go up again. This favorable revisions trend continued until October 2023, when estimates started easing all over again.
The current reading on the revisions trend is that they appear to have stabilized again, as you can see in the chart below that shows how the aggregate bottom-up earnings total for 2024 has evolved lately.
Image Source: Zacks Investment Research
One sector whose earnings outlook appears to have notably turned around is the Tech sector. This sector has a bigger bearing on the aggregate earnings picture than any of the 15 Zacks sectors in the S&P 500 index, as it is on track to bring in more than 28% of the index’s total earnings over the coming four-quarter period.
You can see the recent uptrend in Tech sector estimates in the chart below, which shows the aggregate 2024 earnings estimates for the sector.
Image Source: Zacks Investment Research
With many Tech sector companies starting to report Q4 results this week, we would expect more movement here in the days ahead.
Other sectors whose 2024 earnings estimates also appear to have inched up lately include Retail, Autos, Aerospace, and Utilities.
While estimates for all the other sectors are still under pressure, sectors facing the most pressure on estimates include Transportation, Industrial Products, and Consumer Discretionary.
For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>>Q4 Earnings Season Kicks off Positively