{"id":315,"date":"2017-01-20T00:37:38","date_gmt":"2017-01-20T05:37:38","guid":{"rendered":"https:\/\/www.etfresearchcenter.com\/articles\/?p=315"},"modified":"2017-01-20T00:37:38","modified_gmt":"2017-01-20T05:37:38","slug":"financials-drive-q4-earnings-growth","status":"publish","type":"post","link":"https:\/\/www.etfrc.com\/articles\/index.php\/2017\/01\/20\/financials-drive-q4-earnings-growth\/","title":{"rendered":"Financials Drive Q4 Earnings Growth"},"content":{"rendered":"

It’s still early in reporting season, but early results indicate that Financials were likely the largest single contributor to S&P 500 earnings growth during the fourth quarter of 2016. With\u00a0only about 10% of S&P 500 firms having reports results\u2014and using consensus expectations for the remaining 90%\u2014we calculate that overall index earnings likely grew by about $19 billion, or 7.6% year-on-year, driven by a nearly 18% improvement in results for firms in the Financial sector (XLF<\/a>). Just as importantly, Energy (XLE<\/a>) was no longer the large drag on S&P earnings that it has been for the last two years (Figure 1).<\/p>\n

 <\/p>\n\n\n\n\n\n
Figure 1: S&P 500 4Q16 Earnings Growth by Sector ($mns and %YoY)<\/strong><\/span><\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n
Source: ETF Research Center and FactSet.
\n<\/em><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Revenue Up<\/strong><\/span><\/p>\n

Sales growth also appears to be picking up. Revenue probably grew about 5.2% year-on-year in Q4 (5.3% excluding the impact of Energy), which is an improvement on growth figures in recent quarters in the three percent range. The biggest contributor to overall index revenue growth came from the Consumer Discretionary sector (XLY<\/a>), which saw a healthy 7.6% gain year-on-year, worth $33 billion. No sector likely saw sales decline, but Industrials (XLI<\/a>) had the slowest growth at 2.8% (Figure 2).<\/p>\n

 <\/p>\n\n\n\n\n\n
Figure 2: S&P 500 4Q16 Sales Growth by Sector ($mns and %YoY)<\/strong><\/span><\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n
Source: ETF Research Center and FactSet.
\n<\/em><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Trading Surprises<\/strong><\/span><\/p>\n

Stock prices tend to move when companies\u00a0post significant “surprises” in an earnings report, so\u00a0one way some investors play earnings season is to buy sectors where early upside surprises have been the largest\u00a0(and avoid those that have\u00a0been negative) on the theory that surprises tend to cluster. In other words, if several of the early-reporting companies in a given sector deliver\u00a0sizable upside\u00a0surprises, other companies in that sector may also be experiencing such favorable conditions that they too will handily beat estimates.<\/p>\n

So far\u00a0the Materials (XLB<\/a>) sector has seen the biggest upside surprises, equivalent to a 22% improvement over consensus expectations. However, the caveat is that most of the upside\u00a0came from\u00a0Monsanto (MON). Meanwhile\u00a0surprises in the Consumer Discretionary\u00a0sector have been more widespread, and overall amount to a 7.1% “beat” of consensus forecasts.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

It’s still early in reporting season, but early results indicate that Financials were likely the largest single contributor to S&P 500 earnings growth during the fourth quarter of 2016. With\u00a0only about 10% of S&P 500 firms having reports results\u2014and using consensus expectations for the remaining 90%\u2014we calculate that overall index earnings likely grew by about…<\/p>\n","protected":false},"author":2,"featured_media":318,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[55,6],"tags":[13,8,9,12,32],"class_list":["post-315","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-earnings","category-sector-etfs","tag-xlb","tag-xle","tag-xlf","tag-xli","tag-xly","description-off"],"_links":{"self":[{"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/posts\/315","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/comments?post=315"}],"version-history":[{"count":5,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/posts\/315\/revisions"}],"predecessor-version":[{"id":331,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/posts\/315\/revisions\/331"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/media\/318"}],"wp:attachment":[{"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/media?parent=315"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/categories?post=315"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/tags?post=315"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}