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Wall Street has been raising its earnings forecasts all year but somehow corporate America keeps beating expectations anyway.
With nearly 80 percent of S&P 500 earnings in the books for the third quarter, the aggregate “blended” quarterly earnings per share have come in 6 percent higher compared to the quarter before at $70.65.
Actual earnings have beat expectations by 10.5 percent on average over recent weeks, which marks the best margin in four years, according to data from Yardeni Research.
That’s also higher than the 8.2 percent beat in the second quarter.
Meanwhile:
- Earnings have grown at a double-digit rate over five of the last six quarters
- Q3 is the ninth straight quarter of positive year-over-year earnings growth
- 10 of the 11 S&P 500 sectors have seen rising earnings so far this quarter
- If the Energy sector finishes with positive earnings growth in the quarter, all 11 sectors would surpass the bar for the first time since 2021
None of that makes it sound like this is a good time for comparisons to the dot-com bubble.
That said, robust earnings don’t negate the fact the market is undeniably top-heavy.
Many investors remain concerned about the collective weight of Big Tech, which now account for about 40 percent of the S&P 500’s market value.
Still, selling stocks out of a fear of froth is hard to justify when earnings continue to accelerate more than expected.
“[T]here is more earnings support for the current tech bubble than the one in the late 1990s,” said Ed Yardeni, founder of Yardeni Research. “There isn’t as much air in the current bubble. It isn’t likely to burst, though it might leak air from time to time.”
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Phil Rosen
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