S&P 500 Companies Knock the Socks off Street Earnings Estimates

Third quarter S&P 500 earnings results for the first two weeks of the season are running far ahead of Street estimates. Importantly, sales are also faring much better than expected. Here's a short breakdown of the results thus far for the S&P 500 companies:

Earnings Reported through Friday:

Positive Surprises: 146
Negative Surprises: 25
% Positive Surprises: 85%
Year over Year earnings growth for reporting companies: -14%

This is just short of remarkable. Last quarter the beat ratio was 75%, the highest in many years. The beat ratio of 85% so far this quarter is far higher than we expected, and we were as optimistic as anyone that earnings would again be better than Street estimates. In addition, the growth for all reporting companies stands at a minus 14%. Just prior to the beginning of the reporting period, the consensus estimate was for a negative 20% year over year earnings growth rate.

Revenues for Reporting Companies:

Positive Surprises: 112
Negative Surprises: 60
% Positive Surprises: 65%
Year over Year revenue growth: -2.8%

The picture for revenue surprises is far less striking than earnings surprises. However, overall, revenues are much better than expected. The most important data, perhaps of the whole list, is that average year over year revenues are down only 2.8%. Prior to the reporting period, revenues were expected to be down more than twice that amount.

Two weeks do not a season make, but thus far, with many important companies reporting, S&P 500 companies are knocking the socks off of Street earnings estimates. The common thread among the good earnings reports is cost control. American companies are just doing an amazing job of right-sizing costs. If this beat-ratio continues, I believe that stocks will continue to move higher in the weeks and months ahead.

I'll update next week.

Data courtesy of Bloomberg

Comments

[logicalthought:]

>>S&P 500 companies are knocking the socks off of Street earnings estimates...<<

And you call yourself an expert on "Rising Dividend Investing"? In case you hadn't noticed, the "estimates" were AWFUL, while the ACTUAL numbers have been way worse than the 2008 comps, and 2008 was already AWFUL. Does this sound to you like a "rising dividend" environment?

Oct 25 09:38 AM

[Swashbuckler:]

"American companies are just doing an amazing job of right-sizing costs." I agree. Across the board expense reduction, including massive layoffs, due to a rapidly deteriorating economy. And, of course, said reductions are providing short term relief at the expense of long term gains. "S&P companies are knocking the socks off of Street earnings estimates". I can't imagine why.

Oct 25 10:24 AM

[David Van K...:]

The overall dividend environment is not rising. Total dividends paid out in 2009 will be less than in 2008.

But for the serious dividend investor, who picks his or her own stocks surgically for the characteristics that invariably apply to the best dividend stocks, their own dividend environment IS rising. Because of their own research, they side-stepped most of the dividend cuts that have brought the overall totals down. Their research allowed them to see that most of those cuts were coming. It some cases, it wan't hard...GE told the world 6 months early that it was going to cut its dividend with a widely-reported press release. It doesn't get much more obvious than that.

Many of the best dividend stocks raised their dividends 2%, 5%, 10% and more this year. And they will do so again next year, and for many years after that. They are there to be found, although you do have to do more than look at the Dividend Aristocrats list and think you've done your "research."

Oct 25 11:32 AM

[Angel Martin:]

Good article. The doom and gloom articles are never this specific wrt actual data.

Oct 25 11:11 PM

[thiazole:]

So true. Always be suspicious of people who expend pages of energy making broad sweeping claims without any real evidence and be thankful to those who provide enough evidence to its own argument with or without author opinion. You will notice that lately, the bear articles seem to be really long unsubstantiated fear mongering, while bull articles are much more rich in data and don't need pages of salesmanship to convince the reader.


On Oct 25 11:11 PM Angel Martin wrote:

> Good article. The doom and gloom articles are never this specific
> wrt actual data.

Oct 26 11:45 AM

[DocTRD:]

Just curious..Anyone know what percentage of S&P 500 this year have seen earnings rise while revenues decline ? Looking for hard stats that I can use in a report.

Nov 02 12:42 PM