Of the 429 S&P 500 companies that have reported earnings to date for the fourth quarter, 72% have reported earnings above estimates. This percentage is slightly above the average of 69% recorded over the past four quarters. The Information Technology (86%) and Consumer Staples (83%) sectors have the highest percentages of companies reporting actual earnings above estimates. In terms of revenues, 66% of companies have reported sales above estimates. This percentage is well above the average of 50% recorded over the past four quarters.
The blended earnings growth rate for Q4 2012 is 4.2% this week, above last week’s growth rate of 3.6%. The increase in the growth rate this week can mainly be attributed to upside earnings surprises reported by companies in multiple sectors. On December 31, the earnings growth rate for the index was 2.6%. Eight of the ten sectors have witnessed an increase in earnings growth rates since that date, led by the Energy and Materials sectors. The Telecom Services and Industrials sectors have recorded the largest decreases in earnings growth since the end of the quarter.
After reporting a decline in earnings growth in Q3 (-1%), the index is reporting earnings growth of 4.2% for Q4. Eight of the ten sectors are reporting earnings growth for the quarter, led by the Financials (16.6%), Materials (12.1%), and Utilities (11.6%) sectors. On the other hand, the Industrials (-16.9%) and Telecom Services (-10.5%) sectors are reporting the weakest earnings growth. The blended revenue growth rate for the index for Q4 is 3.9%, up from an estimate of 2.3% at the end of the quarter. A large upside revenue surprise reported by Prudential is responsible for most of the increase in the revenue growth rate during this time. Slower economic growth in Europe and less favorable foreign-exchange rates had a negative impact on both top-line and bottom-line growth for many multi-national companies in the index in the quarter. However, a number of companies have expressed optimism about renewed economic growth in emerging markets (China) in 2013. In addition, some companies have cited the damage caused by Hurricane Sandy and fiscal policy issues as impediments to earnings and sales growth for the quarter as well.
Corporations and analysts are lowering earnings expectations for Q1 2013. In terms of preannouncements, 72 companies have issued negative EPS guidance for Q1 2013, while 23 companies have issued positive EPS guidance. Analysts have taken down EPS estimates also, as the estimated earnings growth for Q1 2013 has dropped to -0.2% today from an expectation of 2.4% on December 31.
During the upcoming week, the final Dow component (Home Depot) and 38 S&P 500 companies are scheduled to report earnings for the fourth quarter.
Read more about the earnings trends of the S&P 500 and what to expect this earnings season in this week's edition of FactSet Earnings Insight. Visit www.factset.com/earningsinsight to launch the latest report.