Record Highs Despite Cuts to Estimates

“During the month of October, analysts lowered earnings estimates by 1.5% in aggregate for the fourth quarter for the S&P 500. This percentage decline was below the 1-year, 5-year, and 10-year averages for the first month of a quarter. Despite the decline in earnings expectations, the value of the index increased 4.5% during the month. This marked the seventh time in the past nine quarters that earnings estimates dropped and the value of the index rose during the first month of the quarter.

Of the 366 companies that have reported earnings to date for the quarter, 74% have reported earnings above estimates. This percentage is above the average of 73% recorded over the past four years. In terms of revenue, 53% of companies have reported sales above estimates. This percentage is below the average of 59% recorded over the past four years. In aggregate, companies are reporting earnings that are 1.4% above the mean EPS estimate. This percentage is also well below the average of +6.5% over the past four years. If this is the final surprise percentage for the quarter, it will mark the lowest surprise percentage since Q4 2008.” (FactSet)

S&P 500 Bottom Up

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