Broker Check

Better than Feared

| November 13, 2019

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.

Source: Factset

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.



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