The Myth of Peak Corporate Earnings

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My gosh, S&P 500 headline earnings growth for 3Q18 is an astounding 28.2% compared to 3Q17. The picture is just as strong when you look at the details: the technology sector grew at 28.7%, financials at 44.7% and energy a whopping 114%. All 11 sectors had positive earnings growth, 78% of companies beat estimated earnings, revenue grew at a commanding 8.5% and the outlook is positive as well. We have all heard that corporate earnings are at a peak; we believe this is incorrect, since forecasters expect earnings over the next four quarters to rise between 8–10%. What the analysts may mean is that earnings growth cannot continue at a run rate greater than 25%, as it has over the last three quarters. Well, no kidding — that is just math — but we are far away from a peak, as it is clear that earnings next year will be higher than this year. In our view, peak corporate earnings is a myth.

Please see Voya Global Perspectives “Fundamentals Drive the Market,” page 6.

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