Market Wrap
Week Ahead
Narratives
Earnings
Overall, 89% of the companies in the S&P 500 have reported actual results for Q3 2020 to date. Of these companies, 86% have reported actual EPS above estimates, which is well above the five-year average of 73%. If 86% is the final percentage for the quarter, it will mark the highest percentage of S&P 500 companies reporting a positive EPS surprise since FactSet began tracking this metric in 2008. The current record is 84%, which occurred in Q2 2020. In aggregate, these companies are reporting earnings that are 19.5% above the estimates, which is also well above the five-year average of 5.6%. If 19.5% is the final percentage for the quarter, it will mark the second largest earnings surprise percentage reported by the index since FactSet began tracking this metric in 2008, trailing only the 23.1% earnings surprise percentage recorded in the previous quarter.
Due to the number and magnitude of these positive EPS surprises, the blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings decline for the third quarter is smaller now relative to the end of last week and relative to the end of the third quarter. As of today, the S&P 500 is reporting a year-over-year decline in earnings of -7.5%, compared to a year-over-year decline in earnings of -9.9% last week and a year-over-year decline in earnings of -21.2% at the end of the third quarter. Positive earnings surprises reported by companies in multiple sectors (led by the Health Care and Consumer Discretionary sectors) were responsible for the decrease in the overall earnings decline during the past week.
If -7.5% is the actual decline for the quarter, it will mark the third largest year-over-year decline in earnings reported by the index since Q3 2009 (-15.8%), trailing only the previous two quarters. It will also mark the sixth time in the past seven quarters in which the index has reported a year-over-year decline in earnings. Five sectors are reporting year-over-year earnings growth, led by the Health Care sector. Six sectors are reporting a year-over-year decline in earnings, led by the Energy, Industrials, and Consumer Discretionary sectors.
In terms of revenues, 79% of S&P 500 companies have reported actual revenues above estimates, which is above the five-year average of 61%. If 79% is the final percentage for the quarter, it will mark the highest percentage of S&P 500 companies reporting a positive revenue surprise since FactSet began tracking this metric in 2008. The current record is 78%, which occurred in Q4 2017. In aggregate, companies are reporting revenues that are 2.6% above the estimates, which is also above the five-year average of 0.7%. If 2.6% is the final percentage for the quarter, it will mark the largest revenue surprise percentage reported by the index since FactSet began tracking this metric in 2008. The current record is 2.2%, which occurred in Q4 2012.
If -1.7% is the actual decline for the quarter, it will mark the first time the index has reported two consecutive quarters of year-over-year revenue declines since Q1 2016 and Q2 2016. Five sectors are reporting year-over-year growth in revenues, led by the Health Care sector. Six sectors are reporting a year-over-year decline in revenues, led by the Energy and Industrials sectors.