The third quarter earnings season is wrapping up, with 451 companies of the S&P 500 Index reporting so far and sixteen expected to report this week.  Approximately 80% of reported company earnings have exceeding analysts’ expectations, which is in-line with the average of the preceding four quarters yet considerably above the long-term average of 64%.   Sixty percent of companies reporting thus far are exceeding revenue expectations and while this figure is in-line with the long-term average, it is below the average of 73% over the last four quarters.

As of today, all companies in the financial, real estate and utilities sectors have reported.  The sector with the largest surprise is consumer discretionary with energy closely riding its heels.  Information technology has the most companies reporting earnings above expectations, followed by the utilities and health care sectors.  The energy and materials sectors have the most companies that have reported earnings below expectations.

With regard to fourth quarter guidance, earnings are still growing but the majority of companies are projecting EPS to be lower than forecast.  Factoring in earnings expectations, the one-year forward P/E ratio for the S&P 500 Index is 16.3.  Moreover, if earnings are in line with forecast, the market will need to move higher to maintain its current P/E of 18.8.