In other words, it is reasonable for market participants to nurse some doubts about the current earnings backdrop. This is showing up in the aggregate revisions trend for the index as well, as the chart below shows.īut even these low growth expectations for the coming quarters are vulnerable to further downward revisions. Questions about the international economic growth backdrop has emerged as an additional headwind to corporate earnings.Īs a result, estimates for the December quarter as well as full-year 2019 have been coming down for operators like Caterpillar (CAT), Honeywell (HON), 3M (MMM) and others. dollar, cost inflation (particularly on the freight front) and trade tariffs. Just as FedEx (FDX) did in its recent earnings report, a number of major companies provided weak guidance at the time of the Q3 earnings season, blaming factors like the impact of the strong U.S. The multiples for 2018, 20 have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year. Using the same methodology, the index ‘EPS’ works out to $169. The implied ‘EPS’ for the index, calculated using current 2018 P/E of 20.7X and index close, as of December 31st, is $157.70. Estimates for 2019 have been steadily coming down, with the current +7.5% growth rate down from +9.8% in early October 2018. This would follow +33.6% earnings growth on +5.7% revenue growth in Q3.įor full-year 2019, total earnings for the S&P 500 index are expected to be up +7.5% on +5.9% higher revenues, which would follow the +20.7% earnings growth on +6.9% higher revenues in 2018. Excluding the Finance sector’s strong growth, Q4 earnings growth for the rest of the index comes down to +9.6% (from +11.8%).įor the small-cap S&P 600 index, total Q4 earnings are expected to be up +7.1% on +6.5 higher revenues. The strongest year-over-year earnings growth in Q4 is expected to come from the Energy, Transportation, Construction, and Retail sectors. The Transportation sector is the only one experiencing positive estimate revisions, a reflection of weakening oil prices. Estimates have come down the most for the Conglomerates, Construction, Energy and Consumer Discretionary sectors. The negative revisions trend is widespread, with estimates for 15 of the 16 Zacks sectors coming down since the quarter got underway. Estimates have been coming down, with the current +11.8% rate down from +15.9% at the start of the quarter. Total Q4 earnings for the S&P 500 index are expected to be up +11.8% from the same period last year on +5.6% higher revenues. A lot will depend on company guidance and management’s discussion of business conditions on earnings calls in the Q4 earnings season, which takes the spotlight with next week’s releases from the big banks. Many in the market suspect that earnings estimates likely need to fall a lot more before stabilizing. Estimates have been coming down lately, reflecting the impact of economic weakness and rising costs. Market anxiety about the economic outlook has put a question mark over consensus earnings expectations.
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You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here> Note: The following is an excerpt from this week’s Earnings Trends report.
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