S&P Earnings Set for Q4 Slide but Big Profit Rebounds to Come in 2020

S&P 500 earnings are set to fall 0.6% over the fourth quarter, but with big rebounds forecast across the whole of 2020, dovish central banks and improving global growth, bulls are primed for more record highs.

U.S. corporate earnings are expected to slip modestly this quarter, according to estimates collected by Refinitiv, before big rebound in profit growth between now and the end of the year.

S&P 500 companies are expected to see collective earnings slip by 0.6% over the fourth quarter, when compared to the same period last year, a figure that translates to share-weighted earnings of £333.3 billion. Revenues, however, will likely edge higher, by 4.2%, suggesting broader consumer health in the world's biggest economy.

However, upcoming earnings are poised for a big rebound from the previous year, according to current Refinitiv forecasts, with gains estimated from 6% in the first quarter to as high at 14.4% by the fourth quarter of 2020. 

The expected improvements in corporate profits, alongside thawing trade tensions between the U.S. and China and a Federal Reserve that appears committed to low interest rates and ample bank-sector liquidity, suggests the current bull market -- already the longest in history -- has many more months to run.

BofA Securities's latest  'Flow Show' report indicates investors are the most bullish since March of 2018, noting a stronger rotation into equity cyclicals. The note cautioned, however, that investors are pricing in a solid global economic recovery with little or no inflation, which could prove too optimistic in the coming months. 

Just over 25 companies set to report fourth quarter earnings over the next five days, including major Wall Street banks such as Citigroup  (C) - Get Report, Goldman Sachs  (GS) - Get Report, JPMorgan  (JPM) - Get Report, Morgan Stanley  (MS) - Get Report, Bank of America  (BAC) - Get Report and Wells Fargo  (WFC) - Get Report.

Away from financials, investors will also get quarterly updates from Delta Airlines  (DAL) - Get Report, PPG Industries  (PPG) - Get Report, Aloca  (AA) - Get Report and Schlumberger  (SLB) - Get Report.

Fourth quarter earnings growth is likely to be paced by the utilities sector, where profits are expected to rise by 13.9%, and financials, which is expected to post an 11.2% bottom-line gain from last year. 

On the downside, energy stocks are likely to see profits fall 38.3% from last year as crude prices stagnate and investment costs increase. Consumer discretionary sector earnings are also expected to disappoint and are forecast to fall 11% from the same period last year.