Biggest Insights from Q3 Earnings Season so Far

October 17, 2019
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Earnings season is now upon us, and 43 companies tracked by the S&P 500 have already released their data.

Investors looking ahead to reports related to their portfolios can already gain some insights from the data that is available. Here are the most important points to note so far.

Earnings Will Be Down but Revenues are Climbing

From the major companies that have already reported, the bottom line is down -3.8% cumulatively. While this will be disappointing for some investors, there is a positive side, with revenue climbing 3.7%. This indicates that several market factors have changed, which we will look at in more detail in the next section.

It’s worth noting that the largest companies on the S&P 500 have not reported yet. Companies like Microsoft, Apple, Google, and Amazon could tip the balance closer towards positive earnings across the board.

Companies Aren’t Concerned About a Recession in 2020

Economists and even some stock analysts have warned about a recession on the horizon. While recession-related news hit the headlines at many points of this year, we’re yet to see any real evidence that it will come within the next 18 months. The economy is slowing down, but it is still expanding.

Companies that have already reported aren’t concerned about a recession in 2020. One of the reasons being down this quarter is the unfair comparison to 2018. Last year, companies saw the ongoing impact of higher profits thanks to the 2017 tax cuts. They don’t have the same benefit this year, so it’s only natural that many companies will see year-over-year earnings decline.

2020 will be a better benchmark for earnings.

Some Sectors are Bucking the Trend

While earnings are down overall, there are some sectors that saw growth in the third quarter. Transportation, Utilities, Business Services, Construction, and Finance are all up when compared to last year. This trend is likely to continue throughout the season.

The Finance sector has proven to be particularly resilient, especially considering the current low interest rate environment. Banks are making up the deficit by focusing on revenue from their financial services.

Earnings Reports are Critically Important

Anyone invested in the stock market should follow earnings season closely, taking note of their own investments as well as others in the same industry. Earnings performance can provide guidance for the coming months, while helping investors to make smarter stock picks.

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