Is the Earnings Picture Good or Mixed?

The above-average proportion of companies beating 2019 Q3 EPS and revenue estimates is likely a function of low expectations. But the market isn’t rewarding these companies solely for beating consensus estimates. The far more important metric, from the stock market’s standpoint, is company guidance.

Many in the market feared that guidance will be overwhelmingly negative this reporting cycle because of global economic slowdown and negative impact of the lingering trade uncertainty. This fear has not come to fruition, which has emerged as key reassuring aspect of the Q3 earnings season thus far.

That said, a number of well-known companies have disappointed, either missing estimates or providing weak guidance, and their stocks have suffered for that. Twitter (TWTR), Hasbro (HAS), Ford (F), 3M (MMM) and many others will fall in that category.

In terms of the Q3 scorecard, we now have results from 169 S&P 500 members or 33.8% of the index’s total membership. Total earnings for these 169 index members are up +0.2% from the same period last year on +4.2% higher revenues, with 80.5% beating EPS estimates and 62.7% beating revenue estimates. This is a bigger proportion of these companies beating estimates than had been the case in other recent periods.

For a comprehensive review of the Q3 earnings season and expectations for the coming quarters, please check out our weekly Earnings Trends report >>>>> A Better-Than-Expected Earnings Picture

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