Earnings Scorecard -- Q3 EPS Upside Stellar on Mixed Revs

Earnings Scorecard -- Q3's trend holds as EPS upside remains stellar on mixed revenue results

With the bulk of Q3 earnings season concluding this week, we wanted to provide an update on how the reports have fared vs. the Street's expectations. Over 2000 companies that Briefing.com covers have reported their quarterly results since the beginning of October. Of these, 66% have beaten the bottom-line (EPS) consensus, while 25% have missed EPS expectations, and ~8% have been in-line. The number of beats has decreased from 70% and the number of misses has increased from 22% from last week as this week saw a higher number of low quality companies reporting.

While the EPS performance has continued to be overwhelmingly above consensus, top-line performance has still been more mixed, with less than half (47%) beating revenue consensus (this figure excludes ~7% of companies who did not initially report a comparable top line figure, mostly smaller financial institutions). About 25% of the reports have missed on the top-line, while ~20% reported revenue in-line. The trend of upside EPS on lackluster revenue has been consistent throughout earnings season and throughout the recovery.

Since the beginning of October, 88% of the S&P 500 has reported quarterly results. 72% have beaten bottom-line expectations, while ~20% have missed. On the top line, 42% beat while 26% have missed. This data is more or less unchanged from last week's.

Parsing the S&P 500 data by sector, we see that the industrial sector was the most impressive this quarter, as 88% beat EPS expectations. The next best performance came from the health care sector (86% beat), followed by the technology (85%), consumer discretionary (75%), financial (65%), consumer staples (63%), materials (60%) and energy (54%) sectors.

The S&P 500 (SPY) is up 7.2% since October 1. Meanwhile, the materials (+10.5%) and energy (+10.2%) sectors have outperformed as a result of the 2.8% decline in the dollar index over the same period. The cyclical sectors: consumer discretionary (+9.1%), financials (+8.6%) and technology (+8.6%) were the next best performers. Interestingly, the best earnings performer, the industrials (+6.6%), underperformed the broader market. The health care (+3.0%) and utilities (+1.9%) sectors have notably lagged the broader market.

The number of earnings releases drops off considerably next week. Monday and Tuesday are the busiest days of the week, with ~85 companies reporting each day (260 reported yesterday, November 4). Then, retail earnings season picks up, however. Some names of interest reporting next week include: Tuesday: COV, DF, MBI, TSLA; Wednesday: M, RL, SLE, AAP, CSCO;Thursday: KSS, VIA.B and Friday: DIS, NVDA.