This could be an earnings season for the record books

  • FactSet's John Butters notes that 80 percent of the S&P 500 companies have posted better-than-expected earnings, on pace to be the highest beat rate since FactSet began tracking the metric in 2008.
  • A large part of the earnings outperformance comes from tech, health-care and telecom stocks, Butters says.
  • Corporate earnings for the second quarter have grown by 24 percent thus far, outpacing analysts' initial forecast of 20 percent growth.
Traders react after the closing bell on the floor of the New York Stock Exchange (NYSE).
Michael Nagle | Bloomberg | Getty Images
Traders react after the closing bell on the floor of the New York Stock Exchange (NYSE).

Companies are on pace to post the most earnings beats in at least a decade, according to John Butters, senior earnings analyst at FactSet.

Butters said in a note that 80 percent of the S&P 500 companies that have reported quarterly results through Friday have posted better-than-expected earnings. "If 80% is the final number, it will mark the highest percentage since FactSet began tracking this metric in Q3 2008," he said in the note Friday.

Much of the earnings outperformance comes from telecom, health-care and tech companies, Butters noted. All of the S&P 500 telecom companies have reported better-than-expected earnings this season, while 96 percent of health-care companies have outperformed earnings expectations. In tech, 93 percent of company earnings have exceeded forecasts.

Through Friday, 81 percent of S&P 500 companies had released their latest quarterly reports. Some of the companies that have reported better-than-expected results include major banks J.P. Morgan Chase and Bank of America as well as tech giants like Amazon and Apple.

24% increase

Investors came into this earnings season with high hopes as FactSet had forecast year-over-year profits to grow by 20 percent in the second quarter. So far, second-quarter earnings have increased by 24 percent through Friday.

At this rate, quarterly earnings are on pace to post their second-highest year-over-year growth since the third quarter of 2010, when they grew by 34.1 percent, Butters said. "It will also mark the third straight quarter in which the index has reported double-digit, earnings growth. All eleven sectors are reporting year-over-year growth in earnings. Ten sectors are reporting double digit earnings growth, led by the Energy, Materials, and Information Technology sectors," he said.

For the remainder of the year, earnings are forecast to grow at a year-over-year rate of about 20 percent, but Butters said "more moderate growth for early 2019" is expected. Earnings are projected to grow by 7.3 percent in the first quarter of 2019 and by 8.2 percent in the second quarter of next year.