Q4 2022 Earnings Report Card – Highlights, Trends and Sector Performance from this Earnings Season

As the Q4 Earnings season ends, Prism MarketView highlights the key takeaways every Investor should consider…

EPS, Guidance and Estimate Revisions

99% of the S&P 500 have reported earnings for the quarter, of those companies 69% have reported a positive EPS surprise and 65% have reported a positive revenue surprise. Of the S&P 500 companies who announced guidance for Q1 2023, 81 S&P companies issued negative EPS guidance and 24 issued positive EPS guidance.

Analysts typically lower earnings estimates during the first two months of a quarter. This quarter was no exception. During January and February, EPS estimates for the first quarter were lowered by a larger margin than average. Q1 bottom-up EPS decreased by 5.7%. This decline in EPS estimate (5.7%) during the first two months of the first quarter, was larger than the 5-year average, the 10-year average, the 15-year average, and the 20-year average. Additionally, analysts decreased estimates in aggregate for all of 2023 with the bottom-up EPS estimate for CY 2023 declining by 3.4%. This estimate recorded during the first two months of 2023, was greater than the 5-year average, the 10-year average, the 15-year average, and the 20-year average for the first two months of a year. It is the largest decline in the annual bottom-up EPS estimate during the first two months of a year since 2016.

Sector Scorecards: Earnings and Revenues

 The YoY earnings decline for Q4 2022 is -4.6%. The table below examines some of the S&P’s Top Contributors and Detractors to the earnings decline. Some highlights follow:

• Energy was the largest positive contributor to YoY Q4 Earnings for the S&P 500.
  • Higher YoY oil prices contributed to the EPS growth and all 5 sub-industries in the sector reported a YoY increase in earnings of 15% or more.
• Industrials was the second largest contributor to YoY Q4 Earnings for the S&P 500.
  • From an individual company standpoint, Boeing, American and United were the largest contributors to earnings growth for Industrials. If excluded, the growth rate would drop from 38.3% to 12.1%.
• Communication Services was the largest negative contributor to YoY Earnings for the S&P 500.
  • 4 of 5 industries in the sector reported a decline. From an individual company standpoint, if the largest contributors (Meta, Alphabet and Warner Bros) to earnings decline were excluded the sector would have a positive earnings growth of 1.8% vs the decline reported of -24.9%.
• Materials was the second largest negative contributor to YoY Earnings for the S&P 500.
  • All 4 industries in the sector reported a YoY decline in earnings.
• Consumer Discretionary was the third largest negative contributor to YoY Earnings for the S&P 500.
  • From an individual company standpoint, Amazon was the largest contributors to earnings decline for the sector. If excluded, the sector would see an outstanding reversal of a 20.8% growth vs its reported -21.2% decline.

The YoY revenue growth rate for Q4 2022 is 5.3%. The table below examines the S&P’s top 3 contributors to this growth. Some highlights follow:

• Energy again, was the largest positive contributor to YoY Q4 Revenue growth rate for the S&P 500.
  • 4 of the 5 sub-industries reported YoY revenue growth.
• Consumer Discretionary was the second largest positive contributor to YoY Q4 Revenue growth rate for the S&P 500.
  • 8 of the 10 industries in the sector reported YoY growth in revenues. 3 of the 8 showed 10%+ growth with Automobiles leading (25%).
• Industrials was the third largest positive contributor to YoY Q4 Revenue growth rate for the S&P 500.
  • The airlines industry led the YoY growth for the sector (37%). 10 of 12 industries reported YoY revenue growth. 6 of the 10 reported growth higher than 10%.

A Look Ahead for 2023 Earnings & Revenue:

Analysts have projected S&P 500 earnings and revenue growth/decline percentages for each quarter of 2023 along with the calendar year for the S&P 500. Below is an overview of those projections along with Q4 2022 and CY 2022 decline/growth percentages:

** All data provided by FactSet Research Systems Inc.