4 percent of the companies in S&P 500 have reported their Q2 earnings. Let’s take a look at the key takeaways,
Earnings:
- So far, 95 percent of the companies that reported actual results, reported better than expected earnings. Only 5 percent of the companies reported worse than estimated earnings. Average earnings growth rate so far is 20 percent, which is lower than 24.5 percent reported last quarter. This is the highest pace of growth since Q3 2010. After the quarter, S&P500 companies had forecasted 18.9 percent growth. So far, five sectors have beaten that estimate.
- Earnings surprise percentage is at +7.5 percent, which is above the 5-year average of +4.3 percent and the 1-year average of +5.1 percent. This is the highest number since Q4 2010. However, it is lower than +8.3 percent two weeks ago.
- At the sector level, the Health Care, and Information Technology sectors are expected to outperform.
Sales:
- 89 percent of the companies reported higher sales than estimated, so far, which is the highest reading since at least 2008. Sales growth rate is at 8.8 percent, which is higher than 8.5 percent reported last quarter.
- At the sector level, the Industrials, Information Technology, Real Estate sectors are expected to outperform.
Q3/Q4/2018 forecast:
- For Q3 2018, analysts are projecting earnings growth of 21.7 percent and revenue growth of 7.6 percent.
- For Q4 2018, analysts are projecting earnings growth of 17.8 percent and revenue growth of 5.8 percent.
- For the entire 2018, analysts are projecting earnings growth of 20.5 percent and revenue growth of 7.6 percent.
The current forward 12-month P/E ratio for the S&P 500 is at 16.1, lower than its 5-year average of 16.2 and higher than the 10-year average of 14.4
Better than expected earnings in 2017/18 have pushed all three, S&P 500, Dow Jones Industrial Average, and NASDAQ to all-time highs, though the indices have been struggling lately. S&P 500 is currently trading at 2712, while DOW is at 24271, and NASDAQ at 7510.
