Q3 ’19 financial results will start to be released in about three weeks. Let’s take a look at Q3 ’19 EPS and revenue estimates by sector and how they have changed the last 90 days:
Consensus S&P 500 EPS growth estimates by sector:
Consensus S&P 500 revenue growth estimates by sector:
With just 10 days to go in the 3rd quarter of 2019, it is clear that S&P 500 EPS growth has seen a bigger decline in 2019 than S&P 500 revenue, but 2018 was so distorted by the Tax Cuts & Jobs Act (TCJA) these comparisons are tough to make. With Q4 ’18, the year-over-year S&P 500 earnings growth started to slow (Q4 ’18 S&P 500 EPS growth was +16.9% in Q4 ’18, vs the 28% in Q3 ’18), which was a 39% deceleration in the rate of earnings growth for the S&P 500.
Here are some thoughts on a few S&P 500 sectors in terms of the Q3 ’19 revenue estimates:
Energy will see its first quarter of negative revenue growth since Q3 ’16 with consensus expecting -4.5% revenue decline in Q3 ’19;
Technology, of which a big chunk is Apple (NASDAQ:AAPL), is expecting its 3rd straight quarter of y/y negative revenue growth per consensus;
In the 2nd table, note the slowing in Industrial revenue growth, which has slowed from high single digits in late 2017, early 2018, to barely positive today. Industrials are the one sector where the China tariff “tiff” is clearly showing up, but Industrials market cap as a percentage of the S&P 500 is still just 9%-10%.
In terms of sector “earnings” growth Financials are still looking at the best expected rate of growth of 9% for all of 2019, as of this week, and per the IBES data. And yet the Financial stocks have had a horrid 18 months, and have only found a bid within the last 3-4 weeks.
In terms of expected “earnings” growth, Energy, Basic Materials and Technology remain significant drags on the S&P 500, with these three sectors comprising about 27%-28% of the S&P 500 market cap weight.
Conclusion / Summary: when talking S&P 500 earnings, Wall Street pundits rarely talk S&P 500 revenue, and S&P 500 revenue growth is still growing, or expected to grow, a rather respectable mid-single-digits for Q3 ’19. Given how Q4 ’19 sector growth estimates are tracking, we might escape 2019 with low-single-digit earnings growth for the entire year, although we won’t know that with any degree of certainty until Feb ’20.
Q3 ’19 results could be the slowest rates of growth for S&P 500 earnings and revenue for 2019.
We’ll talk about the “degree of certainty’ for 2020 estimates of an expected 11% S&P 500 earnings growth rate, in a future post.
Q3 ’19 S&P 500 EPS And Revenue Growth Could Be Slowest For 2019
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