Higher prices push S&P companies towards potential record sales in Q3 – report (SP500)

Quarterly business report concept.

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S&P 500 (SP500) companies are on track to potentially set a new sales record in the third quarter, though that could be due to higher prices rather than more products sold, according to a report. Issued by S&P Dow Jones Indices.

Businesses across sectors have raised their prices to combat rising costs as inflation soars. While consumers have generally accepted it, companies are also bracing for a reduction in their spending as the Federal Reserve aggressively raises interest rates.

The report estimates that Q3 2022 is overall expected to post a 11.9% increase in the second quarter of 2022 and a Up 0.8% than in the third quarter of last year. Of the 276 elements that make up the benchmark index that released results in October, 191 beat estimates. The 69% beat rate is close to the two-thirds historical average.

“With 53% of issues and 70% of market value reported, Q3 2022 earnings are better than expected (but),” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. still not good) and significantly better than expected”. inside report published on Wednesday.

Better-than-expected earnings performance is one of the contributing factors to the S&P 500 (SP500) up about 8% in Octobera strong bounce for the index after it had its worst monthly results since March 2020 in September.

“The S&P 500 Index trades on earnings better than expected – not as good, but better than expected – because of quiet concerns about a sharp earnings drop and dire projections,” Silverblatt said. in the fourth quarter did not materialize”.

According to the report, operating margin in the third quarter of 2022 is expected to increase to 11.93% from 10.86% in the second quarter of 2022. The average since 1993 is 8.26%. and a record of 13.54% in Q2 2021.

JPMorgan’s Bram Kaplan pointed to the overwhelming contribution of the Energy sector to earnings growth.

“Energy, Industrials and Options continue to report strong growth, while Materials, Financials and Media Services remain lagged. While S&P 500 earnings growth was +2%, this largely Weakness was driven by Energy (achieved 136% year-on-year EPS growth” / y); ex-Energy, earnings fell 6%,” Kaplan said in a note on Friday.

Commodity, oil and gas prices have skyrocketed amid Russia’s war with Ukraine and fueled global inflation. It also resulted in major US oil companies reporting bumper quarterly results. ExxonMobil (XOM) and Chevron (CVX), the two largest domestic producers, accumulated a total of $178 billion in revenue and $31 billion in profits.

The Energy sector was the best performer of the 11 S&P sectors in October, up 24.84%, well above the three-month average of 15.21%.

Earnings season is expected to slow down next week, with expected results from 12% of Russell 1000 members representing only about 4% of index market capitalization. Retail companies also have reports coming, with investors and analysts closely watching for their comments on the state of consumer spending and forecasts for the key holiday sales quarter. ceremony.

Along with a better-than-expected earnings season, the S&P 500 (SP500) The ~8% monthly gain in October was driven by hopes that the Federal Reserve would slow the pace of rate hikes. Last week, Fed Chairman Jerome Powell pointed out smaller hikesbut also indicates a higher than previously expected terminal rate, an announcement that the market subscribes to is not mild enough.

Historically, the S&P 500 is up 57.4% of the time for October, with an average gain of 4.18% for bullish months, an average decline of 4.67% for declines, and an average overall gain. is 0.46%,” Silverblatt noted in the S&P Dow Jones Index Report.

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