EC Were Q3 Earnings Estimates Too Low?

The popular narrative about the Q3 earnings season is that the actual results look better only relative to the very low levels to which estimates had fallen. In other words, consensus EPS and revenue estimates were too easy to beat.

But had that been the case, the beats percentages should have been a lot higher than what we actually saw. With results from 447 S&P 500 members or 89.4% of the index’s total membership already out, we have the numbers to speak for themselves. 

For the 447 S&P 500 members that have reported results through Friday, November 8th, 72.5% are beating EPS estimates and 57.9% are beating revenue estimates. The comparison charts below put these Q3 beats percentages in historical context.

Over the last 12 quarters, the low EPS beats percentage for these 447 index members was 66.9% (2018 Q4) and the high was 79.9% (2018 Q2), with an average EPS beats percentage of 75%. The EPS beats percentage in Q3 started out very high, but currently remains towards the high end of this 12-quarter range.

On the revenues side, the beats percentage for this group of 347 index members has been as low as 48.3% (2015 Q3) and as high as 75.4% (2018 Q1) over the preceding 12-quarter period. As is the case with the EPS beats percentage, the Q3 revenue beats percentage remains within this historical range, though admittedly towards the lower end of that range.

The chart below shows the proportion of these 447 index members that beat both EPS and revenue estimates.

What this means is that Q3 estimates were likely just about right; neither too low, nor too high.

With only 53 S&P 500 members still to report Q3 results, these conclusions about Q3 estimates will likely carry through to the end of this reporting season.

We have almost 450 companies on the docket reporting results this week, including 15 S&P 500 members. This week’s docket includes Wal-Mart (WMT - Free Report) , Cisco Systems (CSCO - Free Report) , Nvidia (NVDA - Free Report) and others. 

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Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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