That’s all, folks — we’re calling time on earnings reports for Q3 2024, and final results paint the same mottled picture for net income and capex spending that we’ve seen for the last six weeks. 

As readers of this blog know, we use the world-renowned Calcbench Earnings Tracker to collect financial disclosures as companies file their latest earnings releases with the Securities and Exchange Commission. With data from more than 3,900 non-financial firms now collected and crunched, we can offer a more complete picture of how Q3 2024 performance compares to the year-earlier period.

The headline performance numbers are in Figure 1, below.

As you can see, revenue is up 4.5 percent from the year-ago period, while net income is down 4.5 percent — but that decline is misleading. We previously noted that the decline in net income was driven by two specific one-time items at Intel ($INTC) and Johnson & Johnson ($JNJ) that were so huge they skewed net income for the entire sample; strike those two, and net income for everyone else was actually up 5.2 percent. 

The other big story from Q3 earnings is net capex spending. In total, net capex spend for all 3,900+ firms is up 16.7 percent from the year-ago period. That should be great news, because it means lots of companies are investing in capital equipment for long-term growth. Right? 

Not exactly. As we first noted several weeks ago, that jump in net capex spending comes from a small number of large firms ramping up their capex spending dramatically. Remove those few big spenders from the group, and net capex spending for all other companies actually declined in Q3. 

For example, net capex spending for all firms went from $287.6 billion one year ago to $335.6 billion this quarter, an increase of $48 billion. But the 10 firms that increased their net capex spending the most raised their spending levels by $48.9 billion — more than the total increase for the whole group. Which means that net capex spending for the 3,900 other firms had to decline.

Indeed, if you widen the lens a bit more, the 25 biggest spenders in our group increased capex spend by $64.1 billion, which is 133 percent of that $48 billion total. So the real story is that a small number of large firms (mostly in technology or energy) ramped up their capex spending dramatically.

Who were these big spenders? See Table 1, below.

An important point to note here is that these numbers are net capex spending. That is, it’s the total amount of money a company spends to purchase new fixed assets, minus whatever gains the company made from selling other fixed assets. When a company reports negative net capex spend, that means it is selling more fixed assets than it’s buying, and is essentially shrinking its total footprint of fixed assets. 

Well, why are companies doing that? With so many companies collectively reporting negative net capex spending, what does that tell us about changing macro-economic conditions? What assets are they selling, anyway? Are they selling because they need cash, or selling because of some strategic shift that allows them to dump assets they no longer need? 

We at Calcbench don’t know (presumably the answers will vary from one company to the next), but clearly these are questions worth keeping in mind as you run your own models and prepare for whatever earnings call is on your calendar. Calcbench gives you the information you need to ask better questions, and then find better answers. 

Calcbench will now put the Earnings Tracker on pause until mid-January, when we start to see Q4 2024 and full-year earnings arrive. 

If Calcbench subscribers wish to get their hands on the template we use for this analysis, so you can conduct your own experiments at home, use this link to the file. 

Please note that the above file will only work with an active Calcbench subscription. If you need an active subscription (and who doesn’t, really, when swift access to real-time data is so important?), contact us at us@calcbench.com.