EC Key Takeaways From The Q4 Earnings Season

With more than three-quarters of Q4 results already in, we can confidently say that the overall earnings picture continues to improve. As we indicated here last week, these quarterly results continue to show earnings growth on track to turn positive in Q4 and momentum on the revenues side.

The revisions trend, which earlier on appeared to be shifting favorably, has been on a negative trend for the last few weeks, with the virus outbreak adding to the historical pattern. That said, the magnitude of negative cuts to current-period estimates still compares favorably to the recent past.

We share below the three main takeaways from the results thus far. Please note that through Friday, February 14th, we have seen Q4 results from 388 S&P 500 members or 77.6% of the index’s total membership. We aren’t quite that further along in the Q4 reporting cycle for the small-cap stocks, with results from only 43.8% of the S&P 600 index out through Friday, February 14th.

First, momentum on the revenues side: For the 388 index members that have reported already, total earnings and revenues are up +1.3% and +4.8%, respectively. The proportion of these companies beating EPS and revenue estimates is 72.9% and 66.2%, respectively.

The comparison charts below put the earnings and revenue growth rates and the EPS and revenue beats percentages in a historical context.

(Click on image to enlarge)

And here are the Q4 EPS and revenue beats percentages.

(Click on image to enlarge)

It is possible to focus only on the revenue performance in the above comparison charts, but we will make it even easier for you by just showing how the Q4 top-line performance stacks up relative to the first three quarters of 2019.

(Click on image to enlarge)

As you can see here, a much bigger proportion of companies are beating top-line estimates, with the EPS beats percentage actually tracking below historical periods. The revenues growth rate doesn’t show the same level momentum, but it has nevertheless held up fairly well.

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Anne Barry 7 months ago Member's comment

Yes, very optimistic.