Almost 60% of the results are in, and earnings continue to surprise to the upside. As things stand now, the median S&P firm will post double-digit year-over-year earnings growth for the 19th straight quarter. While the 10.5% growth is still lower than previous quarters it is much better than expected. The surprise ratio now stands at 3.8:1, down from almost 5:1 a week ago, but still very strong. Positive surprises have been widespread, with every sector showing more positive surprises than disappointments with the exception of Telecom, which has only seen two firms report, and Utilities.
Health Care appears to be the real standout so far this quarter, posting 15.4% year-over-year growth with 26 positive surprises against only four disappointments. The median surprise is a very strong 5.5%. The Materials sector is also having a very robust quarter, with 14.6% year-over-year growth and positive surprises outnumbering disappointments by more than 5:1. Tech appears to be the laggard this quarter, with median earnings of only 1.35%. However even here, positive surprises are far exceeding disappointments by more than 3:1, including large positive surprises by many high profile firms. Telecom is actually showing negative growth, but with only two reports in, it is to early to draw any conclusions about that sector.
It is worth noting that the results so far have been much stronger for the S&P 500 (large-caps) than the S&P 400 (mid-caps) and the S&P 600 (small-caps). Large caps have been much more active in shrinking their share bases through stock buybacks than have their little brothers, and they also tend to have more foreign exposure and thus benefit from the very weak dollar.
Zacks is the best resource for keeping tab on overall earnings trend. As per their database we are headed for another double digit quarter. Also the earnings trend for large caps is better than small caps, that is why small caps are lagging. That weakness might persist till next earnings season. Small caps are more reactive to earnings, while in large caps earnings are anticipated.