Using our Interactive Earnings Report Database, we’re able to track the trend of earnings (bottom line) and revenue (top line) beat rates over time. By “beat rate” we mean the percentage of companies reporting better than expected (versus consensus analyst estimates) EPS or revenues over a given time period.
In the chart below, we show the rolling 3-month earnings and revenue beat rates over the last 15 years. In the mid-2000s, both top and bottom-line beat rates were generally higher than they are now. During the current bull market that began in March 2009, we initially saw a big spike higher in the earnings beat rate. There was then a drift lower from 2010 through mid-2014, and since then we’ve seen an ever-so-slight uptrend emerge. For the revenue beat rate, we also saw a spike higher in the early days of the bull market, and then it trended lower from 2012 through early 2016. Since the start of 2016, the revenue beat rate has picked up significantly. Just this quarter, we’ve actually seen the revenue beat rate cross above the earnings beat rate, which hasn’t been the case since late 2014.
It’s encouraging to see a strong top-line (revenues) beat rate along with a strong bottom-line (EPS) beat rate because revenue numbers are much more difficult for corporations to manufacture a “beat.” The general trend higher in the revenue beat rate over the last 18 months is bullish in our view.
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