Earnings Scoreboard - Buy the expectation, sell the beat

 

Horacio Coutino, multi-asset strategist

Renée Friedman, Global Head of Research

“I think it's going to continue to be a kind of you're trying to thread a needle here because you're trying to be able to push through some pricing to offset the inflationary pressures that are going to continue. At the same time, you've got a consumer, particularly a low income consumer, who's really resistant to any additional pricing. And so, then you've got to try to figure out what is that sort of right combination there, where you're able to get some pricing to offset that inflation at the same time that you're delivering a great value message.”

— Christopher J. Kempczinski, Chairman and CEO, at McDonald’s Q3 earnings call, on 5^th November, 2025.

Who’s scoring highest and why

During the first week of November, 136 S&P 500 companies (including 2 Dow Jones Industrial Average components) reported earnings. Despite companies beating estimates, the market reaction was often underwhelmed. Going into Q3 earnings season, expectations were already sky-high. Last week, consumer-oriented earnings came under close  examination as attention focussed on the growing bifurcation in consumer spending patterns, coupled with specific developments within the gig economy, trends in the pharmaceutical industry and ongoing momentum in the AI CapEx supercycle.

As of 7^th November, 82.5% of the 446 S&P 500 companies that have reported so far beat earnings expectations, while 78.1% surpassed revenue forecasts. According to Factset, the blended Q3 earnings growth rate stands at 13.1% - higher than last week’s 10.7% - and marking the fourth consecutive quarter of double-digit growth and the ninth consecutive quarter of positive earnings growth for the index. The S&P 500 last saw four straight quarters of double-digit earnings growth in 2021, from Q1 to Q4.

The S&P 500 surprise factor is currently at 7.0%, higher than last week’s 5.3%, and lower than the average of 7.3% seen over the past four quarters and below the five-year average of 8.4%. Within sectors, Industrials leads with a 15.6% positive earnings surprise, while Communication Services has fallen short of estimates by 9.3%. Since the end of Q3, Financials has experienced the most significant improvement in earnings growth among all 11 sectors, shifting from a projected increase of 11.6% as of 30^th September, to an increase of 23.7% now.

Communication Services is currently the most significant detractor to the increase in the index’s earnings growth rate due to negative earnings surprises and downward revisions to earnings estimates. The sector is now projected to have a 7.1% decrease in earnings, whereas on 30^th September, it showed an increase of 3.0%. TKO Group reported EPS of $0.47, missing the estimate of $0.59, while Meta Platforms posted an EPS of $1.05, falling far short of the expected $6.72; both represent some of the biggest negative surprises in this sector.

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