U.S. companies are on track to achieve their largest year-over-year increase in quarterly earnings since the second quarter of 2022, thanks to a significant number of S&P 500 companies surpassing Wall Street’s expectations. According to LSEG data, overall third-quarter earnings are projected to have risen by 6.3% compared to the same period last year. This figure is considerably higher than the 1.6% gain estimated by analysts on October 1.
LSEG also reported that 81.3% of the quarterly reports exceeded analysts’ earnings expectations, marking the highest beat rate since the second quarter of 2021. However, it is worth noting that analysts have been revising down their fourth-quarter S&P 500 estimates. The data reveals that earnings for the current quarter are now expected to increase by just 5.8% compared to the previous year, compared to the initial projection of an 11% gain at the beginning of the quarter.
During the third-quarter earnings season, the technology and communication services sectors of the S&P 500 demonstrated the highest beat rates among the 11 sectors. Approximately 90% of technology reports and 89% of communication services reports surpassed analysts’ earnings estimates. Notably, Microsoft (MSFT.O) was one of the prominent S&P 500 companies that delivered better-than-expected results. The company experienced growth in its cloud-computing and PC businesses, driven by customer anticipation of its artificial-intelligence offerings.
Investors had expressed concerns about third-quarter U.S. earnings following a 2.8% year-over-year decline in S&P 500 profits during the second quarter, coupled with a recent surge in U.S. Treasury yields. However, stocks have been on the rise since the end of October, and on Friday, the S&P 500 reached its highest intraday level since September 20.
In conclusion, U.S. companies are poised to achieve significant year-over-year earnings growth in the third quarter, driven by a high number of S&P 500 companies surpassing expectations. While analysts have revised down their fourth-quarter estimates, the technology and communication services sectors have demonstrated strong performance. Despite initial concerns, the stock market has shown resilience and upward momentum.
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