At just past the mid-point of the Q2 2013 earnings season, the percentage of companies reporting actual earnings above estimates is 73%. This percentage is equal to the 4-year average of 73%. However, the earnings growth rate for the second quarter has only increased by one percentage point since the beginning of the earnings season. On June 30, the earnings growth rate was 0.8%. Today, the earnings growth rate is 1.8%. Over the past four years, the median increase in the earnings growth rate from the end of the quarter through the end of the earnings season has been five percentage points.
The answer can be found in the surprise percentage reported to date for the second quarter. The surprise percentage reflects the amount (in aggregate) by which companies are reporting earnings above the estimates for a quarter. At this point in time, the surprise percentage for Q2 2013 is 3.2% (i.e. companies in the S&P 500 are beating EPS estimates in aggregate by 3.2%). This percentage is below the 4-year average of surprise percentage of 7.0%. In fact, if 3.2% is the final surprise percentage for the quarter, it would reflect the second-lowest surprise percentage for the index since Q1 2009. The lowest surprise percentage recorded to date since 2009 was in the third quarter of 2012 (3.1%).
Unless there is an improvement in the surprise percentage during the second-half of the earnings season, there is a good chance that the Q2 2013 quarter will finish with the third lowest earnings growth rate recorded by the index in the past four years, trailing only the Q3 2009 (-15.3%) quarter and the Q3 2012 quarter (-1.5%).
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