So far 50 percent of the companies in S&P 500 have reported their Q4 earnings. Let’s take a look at the key takeaways,
Earnings:
- So far, 75 percent of the companies that reported actual results, reported better than expected earnings. Only 25 percent of the companies reported worse than estimated earnings. Average earnings growth rate so far is 13.4 percent, which is higher than 12 percent reported last week. After the quarter, S&P500 forecasted 11 percent growth. So far, ten sectors have beaten that estimate.
- All eleven sectors are reporting better than expected earnings growth, with energy sector leading the way.
- Earnings surprise percentage is at +4 percent, which is below the 5-year average of +4.3 percent. The energy sector is leading the way with +13.1 percent surprise rate.
- At the sector level, the Materials (93 percent), Healthcare (84 percent), Energy (82 percent), and Information Technology (80 percent) sectors have the highest percentages of companies reporting earnings above estimates, while the Telecom services (50 percent), and Real Estate (50 percent) sectors have the lowest percentage of companies reporting earnings above estimates.
- The new Tax reform is taking a toll on earnings of the financial sector companies, but lifting earnings of others.
Sales:
- 80 percent of the companies reported higher sales than estimated, so far. Sales growth rate is at 7.5 percent.
- At the sector level, the Telecom services (100 percent), Health Care (84 percent), Information Technology (90 percent), and energy (90 percent) sectors have the highest percentages of companies reporting revenues above estimates, while the Utilities (50 percent), and Consumer Staples (50 percent) sectors have the lowest percentages of companies reporting revenues above estimates.
The current forward 12-month P/E ratio for the S&P 500 is at 18, higher than its 5-year average of 16 and 10-year average of 14.2
Better than expected earnings in 2017 have pushed all three, S&P 500, Dow Jones Industrial Average, and NASDAQ to all-time highs. S&P 500 is currently trading at 2742, while DOW is at 25521, and NASDAQ at 7241.
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