🥳 It is both my wife and son’s birthday this week, and I wanted to surprise them by saying Happy Birthday here. Surprise! And speaking of surprises Q3 earnings season began winding down on a relatively positive note. For Q3 2023 81% of S&P 500 companies have reported a positive Earnings Per Share surprise, and 61% of S&P 500 companies have reported a positive revenue surprise. Not bad. That makes the estimated year-over-year earnings growth about 4.1%. If that is the actual growth rate for the quarter, and we are about 91% through the reporting, it will mark the first quarter of year-over-year earnings growth reported since this time in 2022 when we all thought we were staring down a recession.
🎂 Revenue growth has been the most significant contributor to earnings, adding 3.9%, a sign that consumers are still spending. Across sectors, energy has been the largest drag on earnings, while consumer discretionary has been the most buoyant. The frosting on the cake? Maybe, but analysts are now projecting year-over-year earnings growth of only 3.2% next quarter. So the party is perhaps showing signs of also winding down. Corporate commentary has been downbeat, portraying a more challenged business environment heading into 2024.
🎁And management isn’t the only one blowing out candles out there. The University of Michigan Consumer Sentiment Index declined to 60.4, missing consensus estimates of 63.7. Given the parade of bad news, mainly in the form of political and geopolitical events, it’s not surprising. But future spending hinges, at least in part, on confidence and sentiment. This could be an issue for the aforementioned consumer discretionary sector. But fear not, I’ll be helping that sector out in Q4 buying birthday presents. Maybe it will be enough.
-Patrick Huey, CFP®, CAP®, ATP
Victory Independent Planning
Patrick Huey is a small business owner and the author of two books on history and finance as well as the highly-rated recently-released fictional work Hell: A Novel. As owner of Victory Independent Planning, LLC, Patrick works with families and non-profit organizations. He is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Advisor in Philanthropy® and an Accredited Tax Preparer. He earned a Bachelor’s degree in History from the University of Pittsburgh, and a Master of Business Administration from Arizona State University.