On a Roll: S&P 500 Components Record 18th Straight Quarter of +10% Earnings Growth

Talk about a hot streak. Standard and Poor’s [S&P] confirmed recently that the vaunted S&P 500 Index posted its eighteenth consecutive quarter of double-digit earnings growth in Q3, a record-breaking streak that dates all the way back to March 2002.

This wasn’t some namby-pamby ten percent squeaker in Q3, either; total earnings across the index soared 19.9 percent over year-ago levels, as a broad swath of positive earnings surprises pushed profits to record levels. Net-net, the index is expected to post operating earnings of $22.59 per share this quarter, a new record. Operating income even topped the $200 billion level for the first time in history, coming in at $203.3 billion.

"The continued strong earnings have been fueled by increasing sales and unusually high margins as corporations maintain their tight control over expenditures," says Howard Silverblatt, Senior Index Analyst at Standard & Poor's. "The market's expected 14 percent gain quickly improved to a 20 percent gain as the quarter progressed, resulting in the 18th straight quarter of double-digit earnings."

S&P is less sanguine about the fourth quarter: they expect the double-digit earnings growth to come to a halt, with earnings growth tipping down to 8.9 percent, thanks largely to falling profits in the energy patch. But S&P had similar misgivings about the third quarter and was wrong there. Who’s to say that the market won’t surprise to the upside in the fourth quarter as well?

The indexer is similarly downbeat about 2007, with expected earnings growth of just 9.97 percent across the index. S&P expects results to be led by the Information Technology (up 20.92 percent) and Telecommunication Services sectors (up 21.26 percent).

The good news isn’t limited to the U.S.: S&P said that all 27 of the emerging markets it tracks posted gains in October, with the average country index rising 6.01 percent. Meanwhile, 26 of 27 developed countries posted gains, with an average rise of 5.09 percent. South Korea was the sole exception, losing 0.60 percent on the month. Results were led by Turkey, which posted a 13.55 percent rise for the month.

S&P 500 performance since the streak began: