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In the last two weeks, 49% of companies in the S&P 500 index have announced their Q3 earnings. Of these companies, 78% have posted earnings per share (EPS) surpassing estimates. The percentage is a slight improvement from the 5-year and 10-year averages, which stand at 77% and 74%, respectively. Overall, the reported earnings are 7.7% higher than projected. While this is below the 5-year norm of 8.5%, it's notably better than the 10-year average of 6.6%.
Breaking it down by sectors, eight out of eleven are showcasing year-over-year growth. The frontrunners here are Communication Services, Consumer Discretionary, and Financials. Conversely, Energy, Materials, and Health Care sectors are witnessing a decline in their year-over-year earnings.
Regarding revenues, 62% of the companies in the S&P 500 index have reported revenues exceeding estimates. This is slightly underwhelming compared to the 5-year average of 68% and the 10-year average of 64%.
Overall, companies are reporting revenues that surpass estimates by a mere 0.8%. The figure falls short of the 5-year average of 2.0% and the 10-year average of 1.3%. It's worth noting that these averages consider the results from all 500 companies, not just those who've reported at this juncture.
The Israel-Hamas war is hurting these companies
Several renowned global companies are starting to feel the effects of the conflict between Israel and Hamas on their operations. United Airlines (NASDAQ: UAL) indicated that the duration of flight suspensions to Tel Aviv might influence their fourth-quarter results, with their updated earnings per share predictions falling below market expectations. The conflict is a significant concern for leaders in the travel sector. Boeing (NYSE: BA), the aircraft manufacturer, disclosed in a regulatory report that the situation could impact some suppliers and airlines.
Royal Caribbean (NYSE: RCL) had intended for approximately 1.5% of its fourth-quarter capacity to dock in Israel. Jason Liberty, the CEO, mentioned in a recent conference call that some of the revised cruises, initially set to dock there, have their main ports in Haifa, a northern city in Israel.
Align Technology (NASDAQ: ALGN) anticipates facing challenges due to the uncertainty surrounding the conflict, potentially affecting its supply chain. John Morici, the CFO, mentioned that the fourth-quarter operating margin, adjusted for standard accounting practices, is likely to decline from the previous quarter. This decrease is attributed to the company making severance payments in light of necessary staff adjustments related to the current circumstances.
Will the UAW labor strike come to an end?
The United Auto Workers union and Stellantis (NYSE: STLA) have reached a provisional agreement, aiming to conclude approximately six weeks of specific U.S. labor strikes, as stated by the union this Saturday.
The accord, pending approval from union local leaders and members, mirrors a 4½-year agreement that the union and Ford Motor (NYSE: F) established earlier on Wednesday.
Hopes were high that the UAW would strike a deal with General Motors (NYSE: GM), but these were dampened when the union broadened its strike to another GM assembly facility in Spring Hill, Tennessee, on Saturday. UAW President Shawn Fain expressed dissatisfaction with GM's reluctance to finalize a fair agreement.
This tentative deal with Stellantis follows a similar understanding the union came to with Ford earlier in the week, which still awaits endorsement and ratification by the union members and leaders.
The prospective agreement with Stellantis is anticipated to conclude the union's targeted labor strikes initiated when negotiations fell through for 146,000 UAW members ahead of the September 14 deadline. Subsequently, the union recalled over 16,000 Ford workers on strike after arriving at a preliminary agreement with the company.
Ford's arrangement proposed salary hikes of 25% over the agreement's duration, starting with an 11% increase. These combined raises elevate the maximum wage beyond $40 per hour, marking a 68% jump in initial wages to above $28 per hour. Additional highlights of the deal include reinstating cost-of-living adjustments, trimming the eight-year journey to peak wages down to three years, and including the option to strike in response to plant shutdowns, among other improved benefits.
The labor disputes have set GM, Ford, and Stellantis back by billions in lost revenue. Ford disclosed on Thursday that the UAW strike has led to a $1.3 billion loss. Additionally, if the deal gets ratified, Ford expects a surge in labor expenses by about $850 to $900 for each vehicle manufactured. On the other hand, GM reported on Tuesday a loss of approximately $800 million due to the strike.