Profits of U.S. companies in the S&P 500 index were more resilient than previously thought, given the pace at which the Fed is tightening its QE program.
Key Takeaways from the US Reporting Season
What are the key takeaways from the US reporting season in terms of corporate earnings?
Operating earnings for 3Q23 are 8.5% higher than 3Q21 (when the market was hitting all-time highs) and 43% higher than 3Q19 (at par). In 2023 (over 4 quarters), estimated earnings could be 41% higher than the full year 2019 and 8.8% higher than 2021. This result is twice the official inflation rate, i.e., not bad overall.
For the 4 quarters as a whole, operating earnings per share are at an all-time high:
- Consumer sector (goods and services) thanks to record consumer demand.
- Commercial and industrial companies (corporate and public sector account for the majority of earnings).
- Electricity and utilities.
Growing sectors account for almost a quarter of all market capitalization. The extent to which the gains exceed the previous high is shown in the charts.
In a consolidation phase with upward momentum:
- IT sector;
- Financial sector;
- Telecommunications sector.
In an earnings contraction phase:
- Commodity companies;
- Healthcare sector;
- Real estate sector.
Conclusion
The strong and weak sectors, their disposition, and the balance of profits relative to 2019 and 2021 are clear, but structural decomposition is not yet possible due to the lack of primary company data.