The 3Q earnings season opened with a bang as financials' sector bellwethers largely surprised to the upside, resulting in a big positive revision to S&P 500 EPS growth. Over the past week, expectations for financials' 3Q EPS growth rose 1,010 bps, to a 14.1% year-over-year decline, with banks leading (up 1,420 bps) as stalwarts including JPMorgan, Bank of America and Citigroup cleared very low hurdles. These results, along with significant upward revisions to health care (196 bps) and materials (118 bps), bled into S&P 500 forecasts, as consensus now expects a 19% decline -- a 210-bp improvement over the week-ago forecast.
However, if the first week is any guide, companies might not be rewarded for beats. The 35 companies that topped EPS consensus lost a median 85 bps relative to the index in the day after reporting.
However, if the first week is any guide, companies might not be rewarded for beats. The 35 companies that topped EPS consensus lost a median 85 bps relative to the index in the day after reporting.