EC The Retail Sector's Strong Earnings Performance

Q3 Earnings Season Scorecard (as of Friday, November 20th)

We now have Q3 results from 475 S&P 500 members or 95% of the index’s total membership. Total earnings (or aggregate net income) for these 475 companies are down -7.7% from the same period last year on -1.1% lower revenues, with 84.8% beating EPS estimates and 76.4% beating revenue estimates.

The two sets of comparison charts below put the Q3 results from these 475 index members in a historical context, which should give us a sense of how the Q3 earnings season is tracking at this stage relative to other recent periods.

The first set of comparison charts compare the earnings and revenue growth rates for these 475 index members.

The second set of charts compare the proportion of these 475 index members beating EPS and revenue estimates.

As you can see above that not only is the pace of declines decelerating, but also a much bigger proportion of companies are beating EPS and revenue estimates.

The reporting cycle slows down in a notable way going forward, with this week bringing in more than 70 companies to report Q3 results, including 12 S&P 500 members. The notable companies reporting results this week, besides the aforementioned retailers, include Deere & Company (DE - Free Report), Autodesk (ADSK - Free Report), Agilent A, and others.

Looking at Q3 as a whole, combining the actual results that have come out with estimates for the still-to-come companies, total earnings for the index are expected to be down -7.8% on -1% lower revenues.

The key factor from the market’s standpoint is how estimates for 2020 Q4 evolve as we see the last two dozen or so reports come out and look ahead to the early Q4 reporters. The trend thus far is positive, as the chart below shows.

Please note that the revisions trend appears to have leveled off in recent days, with estimates effectively stalling out over the last two weeks.

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.

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William K. 1 month ago Member's comment

An interesting article, telling us the details of what should be obvious: There is a plague going around and people are dying! This is going to have an overall negative effect, relative to the times prior to this plague.

As for the organizations that are still doing well, there was clearly a need to alter the mode of sales already clear to some of them. My experience has been with Home Depot, which already was well into the on-line buying scene. So for them it was just a case of needing to expand an existing mode. The only new feature was adding delivery to buyers sitting in the designated parking spots.

The ones able to make the switch rapidly have prospered. The much smaller businesses have suffered, with many closing. That accounts for part of the rise of the giants.

So certainly there are changes happening, and only half of all changes are for the better.