Of the 98 companies that have reported earnings to date for the quarter, 70% have reported earnings above estimates. This percentage is equal to the average of 70% recorded over the past four quarters. However, only 42% of companies have reported sales above estimates. This percentage is well below the average of 55% recorded over the past four quarters. In fact, it is the lowest percentage of companies to report sales above estimates at this stage of the earnings season since Q1 2009 (35%).
The blended earnings growth rate for Q3 2012 improved this week to -2.3% from -3.3%. Upside earnings surprises reported by companies in the Financials sector (including Bank of America, Goldman Sachs, and Citigroup) were mainly responsible for the increase in the growth rate during the week. Since the end of the quarter (September 30), five of the ten sectors have recorded an increase in earnings growth, led by the Financials, Health Care, and Energy sectors.
If the final earnings growth rate is -2.3%, it will mark the end of the streak of consecutive quarters of earnings growth for the index at eleven. Six of the ten sectors are reporting a decline in earnings growth for the quarter, led by the Materials (-21.8%) and Energy (-20.2%) sectors. Although eight of the ten sectors are reporting revenue growth for the quarter, the blended sales growth rate for the index is -0.8%. The Energy (-18.0%) and Materials (-4.5%) sectors are the only two sectors reporting sales decreases. Slower economic growth in Europe and emerging markets countries (China) and less favorable foreign-exchange rates had a negative impact on both top-line and bottom-line growth for many companies in the index in the third quarter.
Companies and analysts have already begun to lower expectations for Q4 2012. In terms of preannouncements, 21 companies have issued negative EPS guidance for Q4 2012, while just one company has issued positive EPS guidance. Analysts have slightly lowered their growth estimates for Q4 2012 since the end of the third quarter (to 9.4% from 9.6%).
The upcoming week marks the second peak week of the Q3 2012 earnings season, as 8 Dow 30 components and 156 S&P 500 companies are scheduled to report earnings during the week.