Reviewing the S&P 500's Q1 earnings


FactSet reviews the US’ Q1 earnings season.

With just over 90% of the S&P 500's Q1 2018’s earnings having been reported, FactSet reviews the results. Furthermore, they also look to what analysts expect for the rest of 2018, and look at the forward earnings multiple of the index.

Of the 91% of companies in the S&P 500 that have published their results, 78% of the actuals EPS’ reported came in higher than the mean of estimated EPS. 6% reported in line with expectations, and 17% reported a lower EPS than analysts projected on average. If the 78% will be the final percentage for the quarter, it will be the highest percentage of companies outperforming analysts’ mean estimate since FactSet started tracking this in the third quarter of 2008.

FactSet also gives the breakdown into sectors,

At the sector level, the Information Technology (91%) and Health Care (88%) sectors have the highest percentages of companies reporting earnings above estimates, while the Real Estate (61%) sector had the lowest percentage of companies reporting earnings (FFO for Real Estate) above estimates.

Forward Estimates

FactSet also sums analysts’ projections for the coming quarters and what this means for the whole of 2018;

For Q2 2018, analysts are projecting earnings growth of 18.8% and revenue growth of 8.3%.

For Q3 2018, analysts are projecting earnings growth of 20.9% and revenue growth of 7.1%.

For Q4 2018, analysts are projecting earnings growth of 16.5% and revenue growth of 5.7%.

For all of 2018, analysts are projecting earnings growth of 19.2% and revenue growth of 7.2%

Honing in on valuation, they note that the forward 12-month P/E ratio currently stands as 16.5x. This exceeds the 5 and 10-year average earnings multiple and is also slightly higher than the 16.4x measured this time last year.

Finally, they give a sector breakdown of the forward 12m earnings multiple;

At the sector level, the Energy (20.3) and Consumer Discretionary (19.7) sectors have the highest forward 12-month P/E ratios, while the Telecom Services (10.0) and Financials (13.1) sectors have the lowest forward 12-month P/E ratios. Nine sectors have forward 12-month P/E ratios that are above their 10-year averages, led by the Information Technology (18.7 vs. 14.5) sector. The Telecom Service (10.0 vs. 14.1) sector is the only sector that has a forward 12- month P/E ratio below its 10-year average.

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