Will The Election Trump Solid 3Q Corporate Earnings?

Election season has taken most of the headlines but corporate earnings season is quietly putting together some relatively attractive figures. This may not matter short-term (depending on the election results), but for longer term investors it usually does.

For longer term investors, corporate earnings season is one of the more important indicators to track. As you can see in the graphic below, S&P 500 (INDEXSP:.INX) earnings have been pretty solid.

So far, 88% of companies have reported.  67.3% reporting positive sales growth, with growth of 2.9% year over year. Corporate earnings are growing by 3.0% year over year, with 69.3% reporting positive earnings growth. This is the first time since the first quarter of 2015 where earnings grew on a year over year basis.

Digging a bit deeper, here are some  key takeaways:

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  • Energy continues to pressure overall sales and earnings growth, falling -16% and -62% respectively.
  • Cyclical sectors ex. Energy averaged 5% sales growth, and 5.6% earnings growth.
  • Defensive sectors averaged 3.4% sales growth and 6.2% earnings growth.
  • Strongest sales growth came from Consumer Discretionary at 11.5%.
  • Strongest earnings growth came from Financials at 13.0%
  • 92% of Health Care companies saw positive sales growth.
  • Zero of the Telecom companies saw positive earnings growth on a year on year basis.  (Frontier, CenturyLink, AT&T, Verizon, Level 3)

Overall, it is a healthy sign to see a pick-up in cyclical sectors ex-energy. With oil higher than a year ago, annual comparisons for the energy sector are going to become easier. This should remove at least one headwind for overall S&P 500 earnings. Despite the route in health care equities, the sector is performing strongly from an operating basis.

In less than 24 hours we will find out who the next president of the United States is, after that, the market will once again turn to what matters.

s&p 500 3q corporate earnings summery by sector chart 2016

Thanks for reading.


Twitter:  @_SeanDavid

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.