US Q4 earnings season starts better than Q3 one. Expect good earnings momentum to linger, supporting positive total returns this year.

In Short

The Q4 reporting season has just started. For the US, expectations are for a yearly earnings growth of - 7.8% after -6.5% in Q3: a positive yearly growth will start to be visible from Q1 2021 (+16.7%). After 64 firms reported, results look quite solid vs expectations, both for earnings and sales.


  • The Q4 2020 reporting season started and more than 60 US firms reported quite upbeat quarterly results. Surprises are very positive especially for earnings (27%). They are better than Q3 ones (16%) and the last 9 quarters’ average (10%).
  • In particular, financials, industrials, discretionary and tech did better than the sector average.
  • Sales surprise is lower but still positive at 3.3% and better than in Q3 (2.8%) and the last 2 years’ average (1.2%).
  • Yearly growth, for both earnings and sales, is flat (but higher than in Q3), and well in positive territory for materials, discretionary, staples and financials.
  • Q4 earnings revisions are bottoming out (US better than EU in yoy terms) and Q1 ones outright increasing. 12-m forward earnings revisions are coming back from a cyclical peak but remain in positive territory.
  • Macro recovery, USD weakness and higher oil prices are helping the S&P 500 momentum while EA suffers more from weaker GDP revisions and stronger euro. On the other hand, the good Chinese momentum bodes well for export-oriented economies, EU included.
  • US fiscal stimulus will continue to add to GDP and earnings revision, benefiting indirectly also other indices like EMU or Japan. Upside pressure on US yields will bode well for a continuing rotation into Value and to a lesser extent Cyclicals, especially outside the US, where valuations are cheaper.
  • Overall we continue to see total returns in the range of 5-9% in 12 months (US 5%, EMU 6.8% and EM 9%).

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US Q4 earnings season starts better than Q3 one. Expect good earnings momentum to linger, supporting positive total returns this year.

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