S&P 500 Reports Strong Earnings Amid Mixed Sector Performance

S&P 500: Too Many Bulls Crowding the Market? Signs Suggest Pullback Could Be Near

Q3 is officially in the books now that all companies have reported results. Q4 will kick off next week, when the big banks report their Q4 results.

For now, let’s look at how the results came out. 76% of companies beat their earnings expectations, which was slightly below the recent average and Q2’s beat rate. But these averages are skewed by the sharp COVID recovery.

Results came in 7.5% above expectations, which was clearly better than Q2 and the 3rd best quarter over the last 3 years in terms of surprise factor.S&P 500 Earnings-Surprise Factor

Earnings grew 9.1%, which was down from the 13.2% growth rate of Q2. But still a strong recovery for the 5th straight quarter, after the minor “earnings recession” of late 2022 to early 2023.S&P 500 Earnings Growth Rate

Sales grew a solid 5.5%, which tied Q2’s results for the second strongest quarter over the last 2 years.S&P 500 Revenue Growth Rate

Breaking it down by sector, seven of the eleven sectors experienced earnings growth in Q3.

The biggest contributors to the growth rate came from , , and ; while was the clear drag.S&P 500 Earnings Growth - Quarterly

Sales grew in eight of the eleven sectors in Q3, led by tech and health care. Energy was once again the drag on total results.Sales Growth - Quarterly

More companies beat earnings expectations in the communications, healthcare, and tech sectors. With also performing above the index average as well. The clear drag was , , and .Beat Rate -Quarterly

Results beating expectations by a wider than expected margin were led by the utilities and comm services sector. And once again, the materials and real estate sectors disappointed.Surprise Factor - Quarterly

Altogether a pretty solid quarter. Not all that surprising to see the S&P 500 index finish higher in both Q3 and Q4 (actually the S&P 500 is currently on a 5-quarter winning streak). As of today, the market is pricing in about 9.6% earnings growth and 4.1% sales growth as the baseline. (Source: LSEG I/B/E/S)

Of course, the market reaction to earnings will be based on what the actual results are compared to current expectations. Along with the forward guidance.

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