EC Early Q3 Results Show Earnings Recovery In Place

We are off to a good start in Q3 earnings season, with the banks and brokers coming out with a notably improved profitability picture relative to what they were able to show in the first half of the year.

The market appears unwilling to credit these players for their good Q3 showing, but positive results from the perennially out-of-favor banks nevertheless reconfirms the earnings recovery theme that we have been consistently highlighting over the last three months.

The best evidence of this recovery has been the steady improvement in the revisions trend since early July, which helped push estimates for Q3 and beyond higher. We are starting to see the same trend in play for Q4 estimates, as the chart below shows:

(Click on image to enlarge)

We will be looking for this improving revisions trend to gain pace in this next week as we enter the heart of the Q3 earnings season, with more than 300 companies on deck to come out with quarterly results, including 86 S&P 500 members. With results from 49 index members already out, we will have seen Q3 results from 27% of the index’s total membership by the end of this week.

This week’s reporting docket expands beyond the Finance sector that has dominated the results thus far, with bellwethers from Netflix (NFLX - Free Reportand Tesla (TSLA - Free Reportto Procter & Gamble (PG - Free Report)Coca Cola (KO - Free Report)Intel (INTC - Free Reportand a host of others in between. Results from this representative cross-section of the economy will give us a good sense of the earnings landscape.

Q3 Earnings Season Scorecard (as of Friday, October 16th)

We now have Q3 results from 49 S&P 500 members or 9.8% of the index’s total membership. Please note that these 49 index members account for 12.6% of the index’s total market capitalization. Total earnings (or aggregate net income) for these 49 companies are down 17.8% from the same period last year on 2.4% lower revenues, with 85.7% beating EPS estimates and 77.6% beating revenue estimates.

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