US Stocks Expected to Deliver Strong Q4 Earnings, but is the Bull Market Safe?

According to the current financial report season, the fourth quarter is expected to be the best-performing quarter in 2023.

Despite ongoing concerns about the macroeconomic situation and the drag on consumer sentiment, corporate profits have clearly exceeded expectations as the earnings season approaches its halfway point. Cost reductions, increased emphasis on cost control and efficiency, and significantly lowered expectations have all contributed to profit growth for companies.

Zhitong App has learned that some important Pro UltrPro Shrt S&Pro 500 companies have greatly exceeded profit expectations, such as Amazon (AMZN.US), Meta (META.US), Apple (AAPL.US), Chevron, Exxon Mobil, Merck (MRK.US), and Bristol-Myers Squibb (BMY.US). Last week, the fourth-quarter profit growth rates of these companies showed a clear upward trend. In addition, LSEG (formerly Refinitiv) currently has a profit growth rate of nearly 8% for this quarter, far exceeding the expected 4.7% announced by major banks three weeks ago.

In terms of industries, three industries have performed better than expected:

Energy: 90% of companies have exceeded profit expectations, with profits exceeding expectations by nearly 14%.

Healthcare: 85% of companies have exceeded profit expectations, with profits exceeding expectations by nearly 11%.

Technology stocks: 84% of companies have exceeded profit expectations, with profits exceeding expectations by over 5%.

Overall, the current earnings per share growth rate for the Pro UltrPro Shrt S&Pro 500 in the fourth quarter is 7.8%, surpassing the 7.5% in the entire third quarter and reaching the highest level of the year.

2023 Pro UltrPro Shrt S&Pro 500 earnings growth rate

Currently, data shows that 80% of Pro UltrPro Shrt S&Pro 500 companies have exceeded profit expectations, slightly higher than the normal trend, with profits exceeding expectations by more than 6%. Although it has not reached the 7% to 8% excess growth of the previous two quarters, it is still a very strong number.

However, it is important to note that these strong numbers come after a sharp drop in profit expectations entering the reporting season. According to LSEG data, as early as October 1st, the fourth-quarter profit growth for the Pro UltrPro Shrt S&Pro 500 was projected to be 11% YoY.

It is worth noting that although the profitability of many companies has improved significantly since the beginning of 2024, it is still far below Wall Street's expectations four months ago.Although the performance in the fourth quarter was good, the outlook for the future remains relatively weak in terms of sustained positive momentum. Many companies have issued cautious performance guidance during this earnings season, and since January 1st, the profit expectations for the first quarter and full year of 2024 have declined for many companies.

Profit growth rate forecast for Pro UltrPro Shrt S&Pro 500 in 2024