EC Where Are We With Small-Cap Earnings?

When we are discussing corporate earnings in the aggregate, we are typically using the S&P 500 index as the handy proxy. This makes sense as this broad-based index gives us a diverse and handy view of what’s going on in terms of corporate profitability.

In other words, we can generally say with a high degree of confidence that if the earnings outlook for the large-cap S&P 500 (SPY - Free Report) index is improving, then the same must be true for the small-cap indexes as well.

This note takes a look at the Q4 earnings season and the evolving earnings picture for the current and coming quarters for the small-cap S&P 600 (IJR - Free Report) index to see if the aforementioned view makes sense. 

Q4 Earnings Season Scorecard

For the S&P 600 index, we now have Q4 results from 551 companies or 91.7% of the index’s total membership. Total earnings for these companies are up +0.6% from the same period last year on +0.7% higher revenues, with 64.8% beating EPS estimates and 75% beating revenue estimates. The proportion of these 551 S&P 600 members that have beaten both EPS and revenue estimates is 53.5%.

The two sets of comparison charts below put the Q4 performance in a historical context. For reference, we have also provided the corresponding comparisons for the large-cap S&P 500 index.

The earnings and revenue growth for the S&P 600 (SPSM - Free Report) index.

Here is the same comparison for the S&P 500 index (99.2% have reported).

The beats percentages – the proportion of these two indexes beating EPS and revenue estimates.

Beats % for the S&P 600 index.

Beats % for the S&P 500 index.

Looking at Q4 as a whole for the small-cap index, combining the actual results that have come out with estimates for the still-to-come companies, total S&P 600 earnings are expected to be flat from the year-earlier level (0% growth) on +0.3% higher revenues.

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William K. 1 month ago Member's comment

When we look at a large event, like the Boston Marathon, and we wonder how the second half of the participants are doing, it does us no good to look at how the first five are doing. I see a similarity to that here. Consider all of those smaller companies not doing so immensely well that did not make it into the S&P list because of size or profits. A small-cap company is not one of those giants, and so it may not follow a similar trajectory.

Anne Davis 4 weeks ago Member's comment

Good analogy.