With the market currently in correction territory, down more than 10% from highs reached over the summer, the US economy accelerated during the third quarter, and so far corporate earnings are holding up. According to Factset, with 49% of S&P 500 companies reporting 3Q23 results, 78% of those reported earnings above expectations, and 68% reported sales above expectations. Moreover, S&P 500 company earnings are on track to post their first positive earnings growth rate since 3Q22. Similarly, mentions of weakness relative to revenues and demand during company earnings calls also appears to be tracking lower. Over the last six quarters, the term ‘weakness’ relative to revenues grew in frequency. Last quarter, 56 companies mentioned ‘weakness’ and related terms with respect to revenues on S&P 500 company earning calls. Assuming the current ratio holds for the remainder of this earnings season, then 40 companies will have mentioned the term. Unfortunately, this is not the case worldwide, with the term ‘weakness’, on the rise in Europe, particularly within the industrial sector.
Source: Bloomberg, October 2023