Traders work at the New York Stock Exchange (NYSE) in New York City, USA, on February 1, 2024.
Brendan McDermid | Reuters
That's how surprising corporate earnings have been this earnings season: The fourth quarter is now shaping up to be the best of 2023.
Despite continued macroeconomic concerns that have hampered demand and weighed on consumer confidence, nearly halfway through earnings season, earnings are clearly coming in much better than anyone expected.
Help companies achieve results in this round: alleviate input costs; more emphasis on cost control and efficiency; and significantly reduced expectations.
A lot of big wins outweigh some very big ones. S&P 500 companies like Amazon, Goal, Apple, Chevron, Exxon Mobile, merck and Bristol-Myers Squibb have noticeably raised the fourth quarter growth rate at the end of this week.
LSEG, formerly Refinitiv, is now seeing a nearly 8% increase in earnings growth this season. This is much better than the 4.7% expected just three weeks ago, just before the big banks reported their results.
Particularly notable are the better-than-expected results in three sectors:
- Energy – 90% of companies have exceeded profit estimates, with profits almost 14% above expectations.
- Health care – 85% have exceeded the results, with profits almost 11% above expectations.
- technology – 84% have reported earnings above expectations, with earnings more than 5% above expectations.
Looking at the S&P 500 as a whole, the current Q4 EPS growth rate of 7.8% exceeds the 7.5% growth seen in the entire Q3, and is now the highest of the year.
Currently, 80% of the S&P 500 earnings results have surpassed estimates, slightly above normal trends, and earnings are more than 6% ahead of expectations (not quite the 7% to 8% gain). % observed in the previous two quarters, but it is still a very strong number.
One very important caveat: These strong numbers come after earnings expectations fell at the start of the reporting season. On October 1, the S&P 500's fourth-quarter earnings were expected to grow 11% year over year, according to LSEG.
Although the earnings outlook has improved significantly since early 2024, results are still well below what Wall Street expected just four months ago.
And as good as the fourth quarter results have been, there is still no positive momentum going forward. Both first-quarter and full-year 2024 earnings estimates have declined since Jan. 1 as many companies have issued cautious guidance this earnings season.
— Graphics by CNBC's Gabriel Cortés.
