The overall earnings picture has been steadily improving over the last three months as big parts of the U.S. economy have started coming out of the pandemic-driven lockdown. The market will be looking for this improving earnings trend to accelerate as companies start reporting their September-quarter results in the coming days.

The wide majority of companies have fiscal quarters that correspond with the calendar quarters, which is September 30^th for Q3. But not all companies have fiscal quarters that correspond with the calendar quarters, with about two dozen S&P 500 members that have fiscal quarters that ended in August, and 18 such companies have already released their quarterly results.

We and other data aggregators club the results from these 18 index members as part of the Q3 tally. We have another 3 S&P 500 members on deck to report fiscal August-quarter results this week, including Domino’s (DPZ - Free Report) and Paychex (PAYX - Free Report). In other words, we will have seen plenty of such Q3 results before JPMorgan (JPM - Free Report) comes out with its report on the morning of October 13^th.

The expectation is for total S&P 500 earnings to decline -22.8% from the same period last year on -2.9% lower revenues. This would follow the -32.3% decline in Q2 when economic and business activities came to a halt as a result of the pandemic-driven lockdowns.

The earnings outlook has been steadily improving since the start of Q3, as economic and business activities have resumed. While the latest labor market and factory sector readings suggest some deceleration in the recovery, the recovery is nevertheless in place which should sustain the improving earnings trend.

The chart below of how estimates for 2020 Q3 have evolved since early July clearly shows that the revisions trend has turned positive.

The positive revisions trend is not restricted to Q3, but also for Q4 and beyond. Estimates have started moving up again in recent days, after staying essentially stable through most of August and the first weeks of September. The chart below shows the revisions trend for full-year 2020.

The table below shows a summary picture for Q3, contrasted with what was actually achieved in 2020 Q2.

The chart below takes a big-picture view of the quarters, showing Q3 earnings (green bars) and revenue (Orange bars) growth in the context of what was actually achieved in the last few quarters and what is expected in the coming periods.

The chart below shows quarterly earnings totals or quarterly aggregate net income, instead of year-over-year growth rates. This gives us a better appreciation of the pandemic’s earnings imapct.

To get a sense of the aforementioned favorable revisions trend, the current $283.6 billion estimate for Q3 earnings is up from $282.3 billion last week.

The chart below presents the big-picture view on an annual basis. As you can see below, 2020 earnings and revenues are expected to be down -20.8% and -4.8%, respectively.

The above annual growth picture approximates to an index ‘EPS’ of $126.94 for 2020, down from $159.90 in 2019 and $158.85 in 2021.