Tahoe-Truckee Market Beat: Third quarter earnings report
November 22, 2016
The stock market has been performing fairly well so far this year. As I write this on Monday, November 21, the S&P 500 is up 6.57% year to date.
Today, the Dow Jones Industrial Average, the S&P 500, the NASDAQ and the small cap Russell 2000 have all hit record intraday highs. The Dow touched 18,947.44, the S&P 500 logged 2,196.98 and the NASDAQ recorded 5,363.82, pretty good news for stock investors.
One reason the market has been doing well is that the corporate earnings have come in better than expected. Earnings season is just about over with and the median forecast going into the third quarter earnings reports was for another quarterly earnings decline.
According to data from Factset, the earnings growth rate for the S&P 500 has been 3.0% with 95% of the companies having reported. 72% of them have reported earnings above the forecast and 55% of them have reported sales above the estimate. This will be the first time the index has recorded year over year earnings growth since the first quarter of 2015.
The best performing sector has been the new Real Estate sector which posted an earnings growth rate of 35%. The Real Estate sector was led by the Residential REIT and Healthcare industries.
Utilities were the next best performing sector with a growth rate of 16.4%. The Independent Power and Renewable Electricity Producers industry was the number one industry in this sector, posting a growth rate of 86%.
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Once again the Energy sector had the largest drop in earnings, posting a year over year decline of minus -62.9%. The worst industries in the Energy sector were Oil & Gas Exploration & Production, Oil & Gas Drilling, and Oil & Gas Equipment & Services. If the Energy sector were to be excluded from the S&P 500 the earnings growth rate would more than double from 3.0% to 6.4%.
Revenues also grew pretty well last quarter, revenues for the S&P 500 grew by 2.7% and the third quarter was the first time sales have grown since the fourth quarter of 2014. The Consumer Discretionary sector recorded the best revenue growth with a rate of 7.9%.
The Healthcare and Real Estate sectors were the next best in revenue growth. Energy was also the worst performing sector for revenue. The third quarter was a refreshing change from the drop in growth we've seen recently.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.
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