As Q3 Earnings season winds down, we provide a quick update on how the various sectors fared on Sales and EPS results.
91% of S&P 500 companies have already reported, so at this point we have a pretty good indication of how things are going to settle out. Overall, the quarter was pretty impressive with 55% of companies beating Sales estimates and 76% of companies beating Earnings estimates. The standouts on both Sales and Earnings were Technology and Financials, with 91% of Tech companies beating Earnings estimates and 84% of Financials beating Earnings estimates. The laggards were Telecom Services and Materials on both Sales and Earnings. See below a table which ranks the sectors from best to worst on both Sales (left) and Earnings (right):
See below a graphical view of the Sales results by Sector, again ranked from best to worst. Technology, Financials, Real Estate & Healthcare look really good from a Sales perspective. Financials, as we have posted on recently, have had an impressive rally on the heels of the election results, and generally do well as the Yield Curve steepens & investors expect regulations to ease going forward. Healthcare also experienced a relief rally on the election results, as investors had priced in a negative environment for Healthcare companies if the Democrats had won the election. If the yield curve does continue to steepen, this would be a headwind for duration assets, including the Utilities and Real Estate sectors.
On the earnings side, the story was pretty similar, in that Technology & Financials were the leading sectors with ~ 90% of companies beating earnings estimates in those sectors. Real Estate & Telecom looked notably weaker on an earnings basis as nearly 40% of companies in those sectors missed earnings estimates.
Looking at the bigger picture, the main question would be "Is the Earnings Recession behind us?" Looking at overall S&P 500 earnings over the past few years, you will notice that the S&P entered an earnings recession in late 2015 / early 2016. We seem to have pulled out of this trough for now, so the direction and trend is good. We don't put too much faith in the street estimates for EPS going forward, so we will be watching this closely, along with the high-frequency macro datapoints in order to give us a clearer signal for the medium-term market direction.
Important Disclosure Information
Intellectus Partners, LLC ("Advisor") is a registered investment advisor with the Securities and Exchange Commission. This material is provided for informational purposes only. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be direct investment, accounting, tax or legal advice to any one investor. Consult with an accountant or attorney regarding individual accounting, tax or legal advice. No advice may be rendered, unless a client service agreement is in place.
This report has not been prepared, is not intended, and should not be interpreted as a research report regarding any securities of any company. The views contained herein should not be relied on as investment advice with respect to specific securities mentioned, because investment decisions should be based on numerous factors. Statements concerning economic, political or market trends or government policy decisions are based on current conditions, which may change. The views expressed in the referenced materials are subject to change based on market and other conditions. This document may contain certain statements that may be deemed forward‐looking statements.
Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. All information is current as of the date of this material and is subject to change without notice. In providing this information the Advisor believes the information to be reliable, but has not in all cases independently verified such information. The information contained herein is general in nature, is provided for informational purposes only and is not investment advice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, investment model, or products, including the investments, investment strategies or investment themes referenced herein, will be profitable, equal any corresponding indicated historical performance level(s), be suitable for a particular portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.