EC Q4 Earnings Picture Better Than Feared

The market has justifiably breathed a sigh of relief about the picture emerging from the Q4 earnings season. Not that the earnings picture is great, but rather that it is not as bad as many in the market had feared ahead of the start of this earnings season.

Plenty of reports are still to come, with this week alone bringing in more than 500 earnings releases, including 98 from S&P 500 members. But with results from 235 S&P 500 members already out, the trends established already will most likely carry through the rest of this reporting cycle.

We will share the current scorecard and what’s on deck this week a little later, but let’s first point out the key trends that we have seen from the Q4 results through Friday, February 1st.

First, growth is decelerating. This isn’t a surprise, as we knew already that Q4 growth would be materially below the pace set in the first three quarters of the year.

Total earnings for the 113 index members that have reported are up +13.7% from the same period last year on +6.7% higher revenues. Earnings and revenue growth for the same cohort of companies had been +23.5% and +9.8% in the preceding earnings season, respectively. The comparison chart below puts this growth deceleration in a historical context for these 235 index members.

The growth pace is on track to decelerate even further in the current and coming quarters, as we will show a little later.

Second, companies appear to be struggling to beat consensus EPS estimates.

For the 235 index members that have reported results already, 66.8% are beating EPS estimates and only 63.4% are beating revenue estimates. For the same cohort of companies, the proportion of positive EPS and revenue surprises was 77.9% and 62.1% in the Q3 earnings season, respectively.

The comparison charts below put the Q4 beats percentages in a historical context for these 235 companies.

The lag on this front earlier on was more notable on the revenues side, with revenue beats tracking below historical periods. But as you can see above, EPS beats are even more notably tracking below historical periods. The fact is that the Q4 EPS beats percentage is the lowest in more than 3 years.

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For more details about the overall earnings picture, the Q4 earnings season and expectations for the coming periods, please check our weekly 

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