Q4 Earnings Key Takeaways

Quarterly reports are nearing completion, with 95% of S&P 500 companies releasing their numbers. Against this background, we summarize the key points the season has left us.

On the one hand, earnings per share (EPS) behavior was much weaker sequentially since, in 3Q22, a growth of 4.4% was observed year over year (YoY). At the same time, the final figure indicates that, in 4Q22, EPS decreased 3% YoY (at the beginning of January, analysts estimated a 2% YoY drop). Since 3Q20, S&P 500 companies have not reported a reduction in their EPS (-5.7% YoY).

On the other hand, 68% of the sample published an EPS that exceeded consensus expectations; this compares to the long-term average of 66.3% and the average of the last four prior quarters of 75.5%.

By sector:

Energy companies drove most of the results seen at the aggregate level (excluding this sector, S&P 500 EPS would have declined 7% YoY), with earnings growth of 55% YoY.

The industrial and consumer discretionary sectors also contributed positively, recording 40% and 21% YoY increases, respectively. 

On the other hand, the materials and communication services sectors led the negative performance with drops of 29% and 28% YoY.

Another point indicates that 105 companies in the S&P 500 have issued guidance or estimate of earnings growth for 1Q23.

Of these 105 companies, 77% shared a negative guidance, and the remaining 23% gave a positive expectation. This rate of 77% is above the 5-year average of 59% and the 10-year average of 67%; the information technology, manufacturing, and consumer discretionary sectors comprise the most significant number of companies with negative expectations.

With this data, analysts anticipate that S&P 500 earnings per share could decline by 4.5% in 1Q23, so the entire 2023 growth would average around 1.5%.

Finally, the season showed that sales performance was reasonable, with an increase of almost 6% year over year , in which 59% of the sample exceeded analysts’ expectations.

S&P 500 YoY Growth Rates

Source: I/B/E/S

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