US Reporting Season: what to expect from this quarter’s results

It’s shaping up as another quarter of underwhelming earnings growth across the S&P500.

When is US Reporting Season?

The US Reporting Season for Q3 kicks-off in the middle of October, and will extend to around the middle of November.

The market data that matters (S&P500):

Forecast EPS Growth (YoY) Forecast Revenue Growth (YoY) Current Price-to-Earnings Current Price-to-Sales Current Dividend Yield
-3.8% 2.1% 19.19 2.14 1.97%

It’s shaping up as another quarter of underwhelming earnings growth across the S&P500. Leading into the third quarter’s reporting period, analysts are forecasting earnings per share (EPS) to contract by -3.8% on an annualized basis. Naturally, earnings rarely fail to exceed pre-reporting period EPS estimates. However, given the extent of the contraction forecast for US earnings, investors are largely resigned to the fact this reporting season will probably show the softest results for nearly four years. Assuming that US earnings do show negative growth this quarter, it will be the third in a row in which EPS across the S&P500 has shown a year-over-year decline.

What are the key themes to watch out of earnings season?

The fundamentals

The -3.8% contraction in earnings growth, if it materializes, would see EPS across the S&P500 fall to $41.17, from $42.79 a year ago. This will come despite comparatively strong revenue growth for the index of 2.1 per cent. Analysts are expecting a compression in profit margins, caused by stronger wages growth in the US economy, and higher costs arising from the tariffs so-far applied during the US-China trade war. The latter ought to manifest most in the IT and materials stocks, with metals and mining firms, and semiconductor companies, expected to show a contraction in EPS of 61 per cent and 27 per cent respectively.

A weak global economy and the trade-war

The once resilient US economy is looking increasingly vulnerable to the forces enervating global economic growth. To begin with, there are signs that the US economy is displaying some late cycle behaviour. But perhaps of greater relevance right now is how the trade-war is hurting business activity in the US. ISM Manufacturing PMI data recently showed its softest result since the GFC. And looking at a sector-by-sector breakdown of earnings expectations across the S&P500 this quarter, it’s once again the trade-war sensitive energy, materials and information technology stocks that will likely show the greatest contraction in EPS growth.

The outlook for corporate earnings

Despite the overarching pessimism about the prospects for US economic growth, analysts are still forecasting robust EPS growth in the year ahead. In fact, the trajectory of earnings estimates suggest that analysts see this quarter as being the trough for EPS growth for the S&P500, with earnings expected to expand by approximately 13% in the 12 months ahead. These projections firmly imply a marked improvement in global growth – and, by necessity, an improvement in US-China trade-relations. It’s a very sanguine view, that’s liable for downward revisions, if corporate’s forward guidance fails to match such hopefulness.

How could this earnings season impact the financial markets?

S&P500

Judging by the price-action of the S&P500 currently, there remains a reluctance by investors to drive the US stock market to fresh-all-time highs. That index sits barely 2% from that milestone, but with the US economy still displaying signs of weakness, and with falling risk-free rates no longer juicing valuations, it appears investors are awaiting an improvement in the growth outlook before driving stock prices higher. Should corporates deliver strong forward guidance, a toppling of the S&P500’s record high is well within reach. However, should they disappoint, further downside risk for the S&P500 grows, as investors are forecast to dial-down their optimistic earnings outlook.

Cross-market view

Broader financial markets will shift on what this reporting season suggests about the outlook for US and global economic growth. If it’s shown that corporates see a light at the end of the tunnel, that ought to lead to a slight drop in the expectations for further US Fed cuts, a slight lift in growth-sensitive assets, and probably a weaker US Dollar. If the opposite proves true, bets of further policy easing from the Fed ought to be consolidated, US Treasury yields would continue to grind lower, gold will find further fuel to drive its grind higher, and the US Dollar would likely catch-a-bid on its safe-haven appeal.


Denne informasjonen har blitt forberedt av IG Europe GmbH og IG Markets Ltd (begge IG). I tillegg til disclaimeren nedenfor, inneholder ikke denne siden oversikt over kurser, eller tilbud om, eller oppfordring til, en transaksjon i noe finansielt instrument. IG påtar seg intet ansvar for handlinger basert på disse kommentarene og for eventuelle konsekvenser som et resultat av dette. Ingen garanti gis for nøyaktigheten eller fullstendigheten av denne informasjonen. Personer som handler ut i fra denne informasjonen gjør det på egen risiko. Forskning gitt her tar ikke hensyn til spesifikke investeringsmål, finansiell situasjon og behov som angår den enkelte person som mottar dette. Denne informasjonen er ikke utarbeidet i samsvar med regelverket for investeringsanalyser, så derfor er denne informasjonen ansett å være markedsføringsmateriale. Selv om vi ikke er hindret i å handle i forkant av våre anbefalinger, ønsker vi ikke å dra nytte av dem før de blir levert til våre kunder. Se fullstendig disclaimer og kvartalsvis oppsummering.

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