Q3 Earnings Seasons Kicks Into High Gear Amid Mixed Outlook: What to Expect?

investing.com:

While a few companies have already reported results, it is safe to say that the Q3 2023 earnings season will only kick into high gear tomorrow, spearheaded by major U.S. banks. Against a backdrop of economic uncertainty, high interest rates, subdued consumer confidence, and geopolitical tensions stemming from the Israel-Hamas conflict, investors could certainly use some good news.

However, corporate expectations leading up to the season are showing a more mixed backdrop for S&P 500 companies.

In a nutshell, Q3 is expected to witness a 0.3% year-on-year earnings dip, marking the fourth consecutive quarter of decline. It's worth noting that this projected decline for Q3 is the smallest in this four-quarter series, fostering hopes that Q3 2023 may represent the earnings decline's trough.

Concerning corporate EPS expectations, FactSet data shows that 118 S&P 500 companies have issued forecasts for Q3 2023, with 64% being bearish and 36% taking an optimistic stance.

Still, the overall outlook for the third quarter appears somewhat less negative compared to recent quarters as the number of companies issuing pessimistic earnings forecasts aligns with the 10-year average.

Moreover, among the twenty S&P 500 companies that have already reported results for Q3, 17 have surprised to the upside with 14 S&P 500 reporting a positive revenue surprise as well.

From a sector viewpoint, eight out of the eleven sectors are forecasted to achieve year-on-year earnings growth, with the communications services and consumer discretionary sectors leading the way. In contrast, the Energy, Materials, and Healthcare sectors are expected to experience year-on-year earnings declines.

Let's delve deeper to discern which sectors are poised for