Q4 2023 earnings season – growth expected to slow compared to Q3
Q4 2023 earnings growth expected to slow compared to Q3.
Earnings growth to slow
The current expected earnings growth rate is 2.4%, which is lower than the estimated growth rate of 8.1% on September 30. If 2.4% is the actual growth rate, it will mark the second consecutive quarter of year-over-year earnings growth for the US 500 index, but at a lower rate compared to the third quarter.
The earnings outlook for S&P 500 companies in the fourth quarter is currently more pessimistic compared to historical averages. Analysts have lowered their earnings estimates for Q4 2023 by a larger margin than usual, resulting in a decrease in estimated earnings for the quarter. This decline is larger than the 5-year and 10-year averages and represents the largest decrease in quarterly Earnings Per Share (EPS) estimate since Q1 2023.
Negative guidance above average
In terms of guidance, a higher percentage of S&P 500 companies have issued negative EPS guidance for Q4 2023 compared to the average. This suggests that more companies are expecting lower earnings for the quarter. The number and percentage of companies issuing negative EPS guidance are above the 5-year and 10-year averages.
Among the sectors, Communication Services, Utilities, and Consumer Discretionary are projected to report year-over-year earnings growth, while Energy, Materials, and Health Care sectors are predicted to report a decline in earnings.
Analysts have also decreased their revenue estimates for the quarter. The current expected year-over-year revenue growth rate for the S&P 500 is 3.1%, which is lower than the expectations on September 30. If 3.1% is the actual revenue growth rate, it will mark the 12th consecutive quarter of revenue growth for the index.
Longer-term outlook more encouraging
Looking ahead, analysts expect earnings growth of 6.2% for Q1 2024, 10.5% for Q2 2024, and 11.5% for the full year 2024.
The forward 12-month price-to-earnings (P/E) ratio for the S&P 500 is currently 19.3, which is above the 5-year and 10-year averages. It is also higher than the forward P/E ratio recorded at the end of the third quarter.
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