Q4 Earnings Illustrate Earnings Recession

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Fresh weakness in oil is dragging stocks lower today. We don’t have much on the economic data front, but the earnings calendar is very busy today, with 32 S&P 500 index members reporting results, of which 18 reported this morning and the rest after the market’s close.

Including all of this morning’s reports, we now have Q4 results from 45.9% of the S&P 500 members that combined account for 61.3% of the index’s total market capitalization.

On the earnings front, a lot of the focus today will be on Google’s parent Alphabet’s (GOOGL) impressive Q4 results, with the search giant not coming out with improving margins, but plenty of top-line momentum. As a result, the company’s Q4 earnings are up +29.9% from the same period last year on +17.8% higher revenues. Gains in the stock are on track to push Alphabet to have the biggest market cap in the world, surpassing Apple (AAPL).

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Including this morning’s reports from the likes of Exxon (XOM), Pfizer (PFE), UPS (UPS) and others, we now have Q4 results from 233 S&P 500 members that combined account for 61.3% of the index’s total market capitalization. Total earnings for these companies are down -4.8% from the same period last year on -5.1% lower revenues, with 71.7% beating EPS estimates and 48.1% coming ahead of revenue estimates. While the growth rates are below other recent periods for the same group of 233 index members, the ratio of companies beating or meeting estimates is in-line or better than recent periods.

The blended or composite picture for the quarter, combining the actual results from the 233 index members with estimates from the still-to-come 267 companies is for earnings to be down -6.1% on -4.6% lower revenues, the third quarter in a row of negative earnings growth for the index. Q4 growth would barely be in positive territory if the Energy sector drag is excluded from the aggregate picture.

Read: Jim Bianco: Energy Industry "Dead-Man Drilling" Into Bankruptcy

The growth picture isn’t expected to improve in the current period either, with 2016 Q1 estimates steadily coming down as companies report Q4 results and provide weak guidance for the current period. Total Q1 earnings for the S&P 500 index are currently expected to be down -6.6% from the same period last year and -2.3% on an ex-Energy basis. In other words, a fairly underwhelming growth backdrop for the market.

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