DEEP DIVE: S&P 500 Earnings Season's Greetings

The Q4-2022 earnings season is over. Joe reports that S&P 500 earnings data are out for the quarter. We weren’t surprised by the top-line or bottom-line numbers. That’s because we follow the weekly data series on forward revenues, forward earnings, and the forward profit margin. They continue to steer us in the right direction for assessing the near-term outlook for the comparable quarterly data (Fig. 1). (FYI: Forward revenues and earnings are the time-weighted average of analysts’ current and coming years’ consensus expectations, while forward profit margins are the imputed margins calculated from forward revenues and earnings.)

Consider the following:

(1) Revenues

There was no recession in S&P 500 revenues at the end of last year. The series was up 8.1% y/y to a record high (Fig. 2 and Fig. 3). S&P 500 forward revenues has been stalled at a record high since October, though it managed to edge up to a new record high during the February 2 week.

In aggregate (i.e., not on a per-share basis), S&P 500 revenues rose 6.9% y/y. Again, this isn’t surprising since nominal GDP increased 7.4% y/y during Q4 (Fig. 4 and Fig. 5). Over this period, real GDP rose 0.9% y/y, while the GDP deflator increased 6.4%. So inflation has been a major driver of revenues over the past year.

By the way, the 1.2ppt spread between S&P 500 revenues per share and aggregate revenues suggests that buybacks are not significantly boosting revenues per share and earnings per share. Indeed, the average spread between the two was only 0.1ppt per year on average since 2000 (Fig. 6).