With earnings season in full gear, 24/7 Wall St. has been considering where we stand now. The election is just over a week away, and there will be another three or four weeks worth of earnings reports that the market has to digest before the formal tally can be measured.
Credit Suisse has issued its preliminary earnings season report card for the third quarter of 2016. This had an October 26 cut-off date, so it was before Thursday and Friday’s key earnings reports. It was also before the strong gross domestic product (GDP) report, although the GDP report itself does not tally up the corporate earnings as much. Still, it would seem like you could have a strong GDP without strong earnings.
Credit Suisse noted that 41% of large caps, 30% of mid-caps, and 20% small caps have now reported earnings. They showed that 79% of S&P 500 large caps, 71% of mid-caps and 68% of small caps have beat consensus earnings estimates. On revenues, 60% of S&P 500 large caps, 50% of mid-caps and 54% of small caps have beat consensus revenue estimates.
For S&P 500 large caps, earnings beats are still up from last quarter and are near the 2014 highs. They saw the revenue beats for S&P 500 companies have come in a bit over the past week, but they are still well above last quarter’s beat rate.
Here is a sector by sector breakdown that was offered in Credit Suisse’s report:
- The Financials sector (now ex-REITs) has been a bright spot so far this reporting season. Some 56% of large cap Financials and 47% of small cap Financials had reported 3Q16 results. EPS and sales beats have been very strong this reporting season for the sector, both relative to other sectors and relative to last quarter … showing further signs of recovery for Banks, Diversified Financials and Insurance.
- Semiconductors — Semiconductor revisions appear to be rolling over after hitting their historical highs.
- Pharma/Biotech — have also deteriorated, as our indicator has weakened meaningfully.
- Retail — revisions have been choppy recently, but an uptrend is still technically in place.
- Food & Staples Retail — our indicator may be bottoming.
Credit Suisse signaled that guidance trends are still weak relative to history. The report said:
So far guidance trends have been weak this quarter among small and large caps. For both small and large caps, guidance trends are down from last quarter and below their long-term average. For small caps specifically, guidance trends are also just below their 2012/2013 lows. Note that our data provider is tracking if a company raised or lowered previously announced expectations, it is not comparing issued guidance to consensus estimates. We are measuring the percent of guidance raised (number of raised guidance announcements over number of raised plus lowered), including announcements made between October 1st and October 26th.
24/7 Wall St. also received a live scorecard for earnings per share growth in the third quarter. This was provided by S&P Global Market Intelligence.