The picture emerging from the 2014 Q4 earnings season at this stage is one of weakness, with earnings and revenue growth rates tracking below levels that we have been seeing in other recent periods. Weak results from the Finance sector has been a big drag on the aggregate picture at this stage and the growth rates improve once Finance is excluded from the aggregate numbers. But aside from high proportion of companies beating EPS estimates, the results thus far don’t compare favorably to the recent past, whether looked at with or without the Finance sector.
The reporting cycle really accelerates this week, with almost 500 companies coming out with Q4 results, including 136 S&P 500 members. This week’s line-up packs plenty of leaders from all the key sectors, ranging from Google (GOOGL - Analyst Report) and Facebook (FB - Analyst Report) to Caterpillar (CAT - Analyst Report), DuPont (DD - Analyst Report) and much more in between. As such, it may not be unfair to characterize this week as a make or break week for the Q4 earnings season. This week will either fully confirm the weak start we have had thus far or turn it around in the opposite direction. But the trends established this week will carry through the rest of this reporting cycle with only minor changes.
The Q4 Scorecard (as of 1/23/2015)
We have seen Q4 results from 91 S&P 500 members that combined account for 25.5% of the index’s total market capitalization. Total earnings for these companies are up +3.2% from the same period last year, with 73.6% beating EPS estimates. Total revenues are up +2.1% from the same period last year and 50.5% of them are coming ahead with top-line estimates.
The table below shows the current scorecard for the S&P 500 index
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This is a weaker performance than we have seen from the same group of companies in other recent quarters. The charts below compare the Q4 growth rates and beat ratios for these 91 companies with what we had seen from the same group of companies in other recent quarters. As you can see, the earnings and revenue growth rates are weaker than what we have been seeing in other recent quarters. With respect to positive surprises, they are more numerous for earnings and less so for revenues.
The charts below compare the results thus far with what we have seen from the same group of companies in 2014 Q3 and the average for the preceding four quarters.
