It wasn’t much of a hurdle, but it looks like companies jumped it in the third quarter.
With 90% of the Standard & Poor’s 500 reporting, earnings are up 3.7% year over year for the quarter, according to FactSet. Taking into account estimated earnings at companies that haven’t yet reported, earnings are projected to show 3.5% growth in the quarter.
Going into the third quarter, companies were projected by Wall Street analysts to show 1% earnings growth. Among companies that have reported, 69% have exceeded consensus earnings estimates. That’s at the high end of the average historical range. Earnings grew by 2.6% year over year in the second quarter.
Third quarter revenues are up 2.9% with 52% of companies beating analyst projections on revenue. Sales grew 1.7% year over year in the second quarter.
The end of the third quarter shifts attention to projections for the fourth quarter. Estimates now call for fourth quarter earnings growth of 7% on sales growth of 0.6%. Estimates almost always come down as earnings reporting season gets closer so I’d expect fourth quarter estimates to decline as we move through January and February and into March. Three months ago projections for the fourth quarter called for 10% earnings growth.
Projections now see earnings growth of 5% for the full 2013 year on 1.9% sales growth. If those projections were accurate 2013 would turn out to be slightly better than the 4% earnings growth in 2012.
Projections for 2014 are now looking at 11% earnings growth and 4.3% revenue growth. If 2014 earnings come in on those projections, the S&P 500 trades at 14.8 times 2014 earnings.
The likelihood of 2014 projections being too optimistic, however, is extremely high.
At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. When in 2010 he started the mutual fund he manages, Jubak Global Equity Fund (JUBAX), he liquidated all his individual stock holdings and put the money into the fund. The fund may or may not own positions in any stock mentioned. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here.