Traders work on the floor at the Latest York Stock Exchange on Feb. 1, 2024.
Brendan McDermid | Reuters
Here’s how big of a surprise corporate profits have been this earnings season: The fourth quarter is now shaping up to be the best of 2023.
Despite ongoing macroeconomic concerns which have hampered demand and weighed on consumer sentiment, almost halfway into earnings season, profits are clearly coming in much better than anybody expected.
Helping corporations’ bottom lines this round: easing input costs, more emphasis on cost controls and efficiencies and significantly reduced expectations.
A plethora of significant earnings beats amongst some very vital S&P 500 corporations reminiscent of Amazon, Meta, Apple, Chevron, ExxonMobil, Merck and Bristol Myers Squibb have moved the Q4 growth rate notably higher late this week.
LSEG, formerly Refinitiv, is now seeing a virtually 8% rise in earnings growth this season. That is much better than the 4.7% expected just three weeks ago, right before the big banks reported results.
Stronger-than-expected results from three sectors are particularly notable:
- Energy – 90% of the corporations have beat earnings estimates, with profits coming in almost 14% above expectations.
- Health care – 85% have beat on the bottom line, with earnings coming in nearly 11% above expectations.
- Tech – 84% have posted earnings beats, with earnings greater than 5% above expectations.
As for the S&P 500 as an entire, Q4’s current earnings per share growth rate of 7.8% exceeds the 7.5% growth seen in all of Q3 — and is now tops for the 12 months.
Currently, 80% of S&P 500 earnings results have beat estimates, barely higher than normal trends, and earnings have are available greater than 6% above expectations — not quite the 7% to 8% upside seen in the previous two quarters, but still a really strong number.
One very vital caveat: These strong figures come after earnings expectations tumbled going into the reporting season. Back on Oct. 1, S&P 500 fourth-quarter earnings were expected to grow 11% 12 months over 12 months, according to LSEG.
Although the earnings picture has significantly improved since the start of 2024, results are still far below what Wall Street had hoped for a mere 4 months ago.
Nearly as good as fourth-quarter results have been, there’s still no positive momentum looking forward. Each first-quarter and full-year 2024 earnings estimates have come down since Jan. 1 as many corporations have issued cautious guidance this earnings season.
— Charts by CNBC’s Gabriel Cortes.
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