Traders work on the floor of the New York Stock Exchange on February 1, 2024.
Brendan McDiarmid | Reuters
Let’s take a look at how surprising corporate profits have been this earnings season. The fourth quarter is now shaping up to be the best quarter of 2023.
Despite continuing macroeconomic concerns that are hampering demand and weighing on consumer sentiment, earnings season is almost halfway through and profits are clearly much better than anyone expected. is increasing.
Increased returns for companies in this round: relaxed input costs, emphasis on cost control and efficiency, and significantly reduced expectations.
A number of important earnings exceed some very important companies. S&P500 companies such as Amazon, meta, apple, chevron, exxon mobil, Merck and bristol myers squib The fourth quarter growth rate picked up significantly later this week.
LSEG (formerly Refinitiv) has seen its profit growth rate rise by nearly 8% this season. This is far higher than the 4.7% expected just three weeks ago, just before major banks announced their results.
Three sectors are particularly noteworthy for their better-than-expected results:
- energy – 90% of companies exceeded earnings expectations, with earnings exceeding expectations by almost 14%.
- health care – 85% achieved the bottom line, with profits exceeding expectations by nearly 11%.
- technology – 84% exceeded expectations by more than 5% and exceeded profits.
When it comes to the overall S&P 500 index, current earnings per share growth of 7.8% for the fourth quarter is higher than the 7.5% growth seen in the entire third quarter, making it the highest for the year.
Currently, 80% of S&P 500 companies’ earnings beat expectations, slightly above normal trends, and profits exceed expectations by more than 6%. While that’s less than the 7% to 8% gains seen in the past two quarters, it’s still a strong showing. Very strong numbers.
There is one very important caveat. These strong numbers come after earnings expectations declined heading into earnings season. As of Oct. 1, the S&P 500’s fourth-quarter earnings were expected to rise 11% from a year earlier, according to LSEG.
While the earnings picture has improved significantly since the start of 2024, the results are still far below what Wall Street was expecting just four months ago.
Although the fourth quarter results were positive, there is still no positive momentum going forward. Both first-quarter and full-year earnings estimates for 2024 have been revised downward since January 1, as many companies have issued cautious guidance this earnings season.
— Charts by CNBC’s Gabriel Cortez.
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