Q4 2023 Earnings: The Winter Thaw Has Begun

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I love spending time outdoors—except when it’s 20 degrees outside. For me, winter in Boston is a time to focus on self-improvement, whether that’s working on fitness goals or taking a class, so I can enjoy the warm weather when it finally arrives. Still, the winter can seem very long, as did 2022 and 2023 for many businesses. Companies saw margins contract, sought to lower their debt loads as rates rose, and made efforts to right-size their businesses for what seemed like an oncoming recession.

Now, the recession predictions for 2023 seem like they’re in the rearview mirror, considering the 44 percent rise in the price of the S&P 500 from the low on October 12, 2022, to March 7, 2024. Although there were a few quarters of negative year-over-year earnings growth during 2023, we’ll likely end the year just slightly in the green, with earnings per share growth at 0.4 percent for 2023 (as of March 7) with most of the S&P 500 done reporting for the year. While inflation has started to come down, companies were able to keep revenue growth high enough to offset the declines in margins during the year.

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Avoiding a Recession Vs. Beating High Expectations

The rise in prices in 2023 was largely a result of beating low market expectations, and the fourth quarter was no exception. We came into the quarter expecting earnings growth of only 1.3 percent, but most sectors beat expectations to report 4.1 percent earnings growth (98 percent of the S&P 500 has reported as of March 8). The biggest difference between the third quarter and the fourth quarter was that expectations for the future remain high. During the third quarter, the fourth quarter bar was lowered from an expectation of 8 percent growth to the 1.3 percent growth that was expected at the beginning of earnings season.

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