On Monday, the third quarter earnings season will officially close out, with H&R Block as the final S&P 500 company to report. The season is ending with impressive earnings growth of 11.7%, paired with revenue growth of 4.8%, proving that companies are still closely managing costs and using share buybacks to get a pop on the bottom-line. Better-than-expected quarterly results were well-received by investors, with the S&P 500 index climbing 5.0% from the time third quarter earnings season began on October 8 to yesterday's close.
Standout sectors for profit growth include energy, health care and consumer discretionary. Energy results for the third quarter depict a tale of two growth rates, with the sector exhibiting the highest earnings growth rate of all 10 sectors at 14.5%, and the lowest sales growth rate of 1.1%. This of course is due to the severe drop in oil prices during the quarter, with Brent Crude falling 15% from July to October. Such a decline certainly ate into the margins of oil, gas and consumable fuels companies, that industry seeing year-over-year (YoY) revenue growth that was nearly flat at 0.4%.
At the company level, Exxon Mobil typically has the most noticeable impact because it is the second biggest company in the S&P 500 by market capitalization after Apple. Exxon saw profits increase 6% YoY, with revenues falling 4%. The fourth quarter is only expected to get worse for oil and gas companies, with both top and bottom-line estimates in the red for the industry at -8.3% and -2.4%, respectively. The Energy sector as a whole is currently expected to post earnings growth of 1.3% and a revenue decline of 6.7% for the fourth quarter.
Health Care was a winner again this quarter, with profit growth of 13.9%, the second highest of all 10 sectors, and the highest revenue growth rate of 12.2%. For the second quarter in a row, the sector was driven by the Biotechnology industry, with earnings growth of 45% and revenue growth of 39%. Notable company performances includes Gilead Sciences, Biogen and Alexion Pharmaceuticals, all posting third quarter profit growth above the 50% mark.
