Q4 2022 Earnings Estimates Begin to Fall

With most of the S&P 500 companies having reported third quarter earnings, analysts are now training their sights on fourth quarter profits and 2023 expectations.

Companies accounting for roughly 90% of the S&P 500’s market capitalization have reported so far, with third quarter earnings beating analyst expectations by about 3%, a relatively low figure. Now analysts are projecting that fourth quarter earnings will decline for the first time in two years as rising interest rates and slowing growth dampen the outlook for profits.

Estimates have been falling for 2023 quarters as well. Goldman Sachs recently cut its 2023 S&P 500 earnings per share (EPS) growth forecast to zero, citing weakening profit margins. Stocks have seen EPS forecasts fall by 15% in the past six months, according to FactSet. 

For the fourth quarter, analysts are forecasting a 0.4% fall in year-over-year earnings for S&P 500 companies, according to IBES data. That compares with a 5.8% increase forecast on Oct. 1. 

The last time there was a quarterly decline in S&P 500 earnings was in the third quarter of 2020, when companies were reeling from the onset of the COVID-19 pandemic.