Stocks aren’t expected to do much in today’s session. But will be closing the week on a very strong footing after a stron rebougnd this week that essentially erased most of recent losses. The focus lately has been on the Q3 earnings season that has largely turned out to be reassuring enough.
We will remain in the thick of the earnings season next week as well, with more than 150 S&P 500 index members reporting results. But the Fed meeting and the first look at Q3 GDP will likely dominate the market’s attention.
Procter & Gamble (PG), UPS (UPS) and Ford (F) are among the notable reports this morning. UPS came ahead of estimates and appears to be better prepared for the coming holidays delivery season, unlike its operational challenges last year’s holidays. Ford’s report carried few surprises, though results were a shade better compared to their lowered guidance late last week, with the automaker’s big European exposure as the primary drag.
P&G results are disappointing, but investors will likely cheer their Duracell spin-off announcement. All in all, the tone of this morning’s and last evening’s reports is broadly reassuring, the Amazon (AMZN) miss notwithstanding.
The updated Q3 earnings season scorecard now shows that we have seen results from 207 S&P 500 members that combined account for 54.1% of the index’s total market capitalization. Total earnings for these 207 companies are up +4.1% from the same period last year, with 68.1% of the companies beating earnings estimates. Total revenues are up a much stronger +4.7%, with 54.6% beating top-line estimates.
The Q3 earnings growth rate for these 207 companies is below the level we saw in 2014 Q2 and the average for the preceding four quarters. But it’s notably better on the top line, with the +4.7% revenue growth rate for these companies up from +3.9% in Q2 and the 4-quarter average growth rate of +3.1% for the same group of 207 companies. Unlike the improving revenue growth rate, fewer companies are able to come out with positive revenue surprises, with the Q3 revenue beat ratio tracking below levels we were seeing for the same group of companies in recent quarters.
The composite growth rate for Q3, combining the actual results from the 207 S&P 500 members that have reported with estimates for the still-to-come 293 companies is for earnings growth of +4.1% on +2.9% higher revenues. The composite Q3 growth rate has been steadily improving gin recent days as companies report results and beat estimates.
Estimates for the current period (2014 Q4) have started coming down, with Q4 earnings now expected to be up +5.1% from the same period last year, down from +9.6% growth expected in late September. The negative revisions trend will likely accelerate further as the Q3 reporting cycle peaks next week.
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