A Brief Note on Corporate Earnings… One of the Key Drivers of the Stock Market.

Corporate Earnings Continue to Be Favorable

While daily headlines focused on the huge daily market swings, little attention was paid to the fact that companies are reporting very solid fourth quarter earnings. Taken directly from research firm FactSet, U.S. companies have reported the following so far:

Earnings Scorecard: For Q4 2017 (with 68% of the companies in the S&P 500 reporting actual results for the quarter), 74% of S&P 500 companies have reported positive EPS surprises and 79% have reported positive sales surprises.
If 79% is the final number for the quarter, it will mark the highest percentage since FactSet began tracking this metric in Q3 2008.
Earnings Growth: For Q4 2017, the blended earnings growth rate for the S&P 500 is 14.0%. All eleven sectors are reporting earnings growth for the quarter, led by the Energy sector.
Earnings Revisions: On December 31, the estimated earnings growth rate for Q4 2017 was 11.0%. Eight sectors have higher growth rates today (compared to December 31) due to upward revisions to estimates and positive earnings surprises.
Earnings Guidance: For Q1 2018, 33 S&P 500 companies have issued negative EPS guidance and 32 S&P 500 companies have issued positive EPS guidance.
Valuation: The forward 12-month P/E ratio for the S&P 500 is 16.3. This P/E ratio is above the 5-year average (16.0) and above the 10-year average (14.3).