Earlier in the week, we noted that the earnings and revenue beat rates this season have been very weak. As it stands now, just 57.9% of all US companies that have reported have beaten analyst earnings estimates. This would be the weakest reading since the bull market began in early 2009 if it stands. The top line revenue beat rate has been even worse at just 54%, which would also be the weakest reading seen since the bull market began.
So companies as a whole have had a tough time living up to analyst expectations for the fourth quarter, but how does forward guidance look? Just as bad. Below is a chart showing the spread between the percentage of US companies that have raised guidance minus the percentage that have lowered guidance this earnings season. As shown, the number currently sits at -3.3 percentage points, meaning more companies have been lowering than raising guidance.
Last quarter was the first earnings season since the financial crisis ended where the guidance spread finished negative. Unless we get a pretty big reversal by the time earnings season ends in mid-February, it looks like we're now going to have two consecutive quarters with a negative guidance reading.
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