Tahoe-Truckee Market Beat: Third quarter earnings update
We’re a little over halfway through the third quarter earnings reporting and so far, the results have been a little better than expected overall.
Back on September 30th, the estimate was for an earnings drop of minus -2.2%. All of the S&P sectors have posted positive earnings surprises. The Utilities, Information Technology and Financials sectors have had the highest percent of companies reporting results better than the average estimate.
According to data from FactSet, over 58% of companies have reported and 74% of those have beaten their earnings estimate. To date, the earnings growth rate has been +1.6%. The forecast was for another decline in earnings this quarter — if earnings do in fact grow, it will be the first time the index has reported year over year earnings growth since the first quarter of 2015. Many forecasters weren’t predicting earnings growth to return until the fourth quarter of this year or the first quarter of 2017.
Energy, Real Estate, Utilities and the Financials sectors have reported the best difference between actual earnings and the average estimates. Energy is still the worst performing sector in terms of earnings, but they have not been as bad as forecast. If the Energy sector were excluded from the S&P, the growth rate for the S&P 500 index would jump up to +4.9% from the current rate of +1.6%
The growth in the new Real Estate sector has been led by the Residential Real Estate Investment Trust industry. The Real Estate sector has reported a growth rate of +16% so far this quarter. The Financials sector has been led by the Investment Banking and Brokerage companies Industry and is reporting a growth rate of +8% to date.
Hopefully, the good earnings reports will continue for the next part of the earnings season. As of October 28th, the S&P 500 was down -1.93% for the month of October and up +4.03% year to date. I’ll give another update after the earnings reporting season comes to a conclusion.
In the meantime, we’ll have to monitor the FOMC meeting and the results of the election which will be coming up soon. The election results can always have an impact on the stock market and right now it looks like the election could be fairly close.
I just want it to get over with so I can watch a game on TV without getting bombarded by political advertising.
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.