Better than Feared
According to Factset, in Q3 2019 (with 89% of the companies in the S&P 500 reporting actual results), 75% of S&P 500 companies have reported a positive EPS surprise and 60% of S&P 500 companies have reported a positive revenue surprise. In aggregate, earnings have exceeded expectations by 3.8%, which is below the 5-year average of 4.9%. If -2.4% is the actual decline for the quarter, it will mark the first time the index has reported three straight quarters of year-over-year earnings declines since Q4 2015 through Q2 2016. The S&P 500’s P/E on next-12-month (NTM) EPS stands at 17.5x, vs the average multiple of 16.4x since 2000.
Slow global growth clearly has affected companies with over 50% of sales outside the US. The back and forth on the trade deal between the US and China as well as the denial of the tariff rollback from the US, will continue to cause some headwinds in the equity market. Any pullback or consolidation in the equity market at this level would be very healthy, as equities have had a good run amidst the earning season.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. The fast price swings in commodities and currencies will result in significant volatility in an investor’s holdings.