The S&P 500 is likely to report earnings growth above 13 per cent for the third quarter, potentially marking the fourth consecutive quarter of double-digit expansion, according to FactSet analyst John Butters. This anticipated surge underscores the continued financial robustness of major listed companies. FactSet is a financial data and software company delivering insights to the global investment community. Their comprehensive data and analytics assist investors in making informed decisions.
Butters noted that the estimated earnings growth rate for the S&P 500 for the third quarter is 8.0 per cent. This figure would represent the ninth consecutive quarter of year-over-year earnings growth reported by the index, indicating sustained positive momentum in corporate profitability.
According to Butters, the overall earnings growth rate for the index increases when companies in the S&P 500 report actual earnings exceeding estimates during an earnings season. This is because the higher actual earnings per share (EPS) figures replace the lower estimated EPS numbers in the growth rate calculation. He provided an example illustrating how an upside earnings surprise can significantly boost the actual earnings growth rate for a company in a given quarter.
Butters further highlighted a historical trend, stating that the actual earnings growth rate has surpassed the estimated earnings growth rate at the end of the quarter in 37 of the past 40 quarters for the S&P 500. The exceptions to this pattern were observed in the first quarter of 2020, the third quarter of 2022, and the fourth quarter of 2022.
