At the start of earnings season, bottoms up estimates (according to Bloomberg) for Q4 S&P 500 earnings growth stood at +2.9% (yoy). With 70% of companies reporting, actual earnings growth for the fourth quarter stands at 9.5%.
Below is a chart showing estimated and actual Q4 earnings growth rates for S&P 500 sectors. We have omitted Telecom and Utilities because such a small number of companies have reported from these two sectors so far. As shown, the Financial sector has seen the strongest Q4 year-over-year earnings growth at 40.1%. At the start of earnings season, estimates called for growth of just 17.9%, so Financials have significantly outperformed. Materials, Energy and Consumer Staples have all seen double-digit earnings growth as well, even though none of them were expected to grow this much in the fourth quarter.
Just two sectors have seen a decline in earnings versus Q4 2011 (Industrials and Health Care), but even here, both sectors are outperforming estimates.
With 70% of the Q4 reporting period now complete, earnings growth has been stronger than expected across the board. The market appears to be responding accordingly.
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