If you’re not already aware, Bespoke maintains an interactive database that contains earnings report data for more than 4,000 US stocks. The database has more than 130,000 individual quarterly earnings reports on file going back to 2001, and there are a limitless ways for traders and investors to analyze the data.
One of the things we track is whether or not a company beats or misses consensus EPS and revenue estimates. Using our database, which you can access by signing up for a Bespoke Institutional membership, below is a tracker we’ve created to follow the percentage of companies that have beaten EPS estimates on a rolling 3-month basis.
As shown, earnings beat rates have actually been trending slightly lower over the last 15 years. In the mid-2000s, the beat rate stayed consistently in a range between 60 and 70%. From 2011 through 2015, the range shifted lower from 55% to 60%. Only recently have we seen a steady uptick in the rolling 3-month beat rate that now stands at just under 63%.
In the chart you can see the performance of the S&P 500 as well. While this isn’t a great leading indicator, we did see the beat rate start to trend lower in 2006 ahead of the 2007 peak for the stock market. We also saw a huge spike in the beat rate at the very beginning of the current bull market that began in early 2009. In hindsight, that turned out to be an important tell.
The beat rate did, however, provide a false tell when it dipped to very low levels from late 2013 through mid-2014. Stocks never really skipped a beat during that period where companies were having a harder time meeting expectations.
No reading is perfect, but we find this particular tracker to be quite interesting and useful. We’ll continue to monitor it for spikes, drops, or divergences and report back to clients when we see them. If you’d like access to our beat rate tracker, simply sign up for one of our premium membership options today! You won’t be disappointed.