Today, Calcbench kicks off our quarterly earnings analysis extravaganza, with our first visit to the Calcbench Earnings Tracker for Q3 2024. Things don’t look great — unless you know where to look; our analysis shows that two outliers have skewed the overall numbers so that they look much worse than they actually are.

As you may know, our Earnings Tracker template pulls in financial disclosures the moment companies file their latest earnings releases with the Securities and Exchange Commission. The Tracker provides an up-to-the minute snapshot of financial performance compared to the year-earlier period.

As of noon ET this afternoon, we had data for more than 1,000 non-financial companies. The headline numbers are in Figure 1 below.

So far this quarter, revenue is up 3.1 percent compared to third-quarter 2023. Yet net income is down a whopping 9.6 percent. EBIT (which is essentially the same as operating income) is flat.

Time to dump your index fund holdings, right? Maybe not:. We dug a bit deeper and found that the decline in net income is entirely due to two companies reporting huge, one-time items — items so large that Johnson & Johnson ($JNJ) and Intel ($INTC) –steered overall net income growth into negative territory for the entire group.

For J&J, it’s all about year-over-year comparisons. The company reported a massive one-time gain one year ago when it sold off its stake in Kenvue Corp. ($KVUE) for $21.7 billion. That gain didn’t recur, so even though J&J reported $2.7 billion in net income this quarter, that’s down roughly 90 percent from the $26.03 billion it reported one year ago. Meanwhile, Intel just reported a $5.6 billion restructuring charge for Q3 2024 along with various other losses. So Intel’s bottom line is a stunning $16.64 billion net loss, compared to $297 million in net income a year ago.

Taken together, the earnings explain why overall net income growth is (so far, at least) down 9.6 percent. If you remove J&J and Intel from the sample, overall net income is actually up by 2.5 percent from one year ago. See Figure 2, below.

Note: For all the stickler statisticians out there, we also ran the numbers striking the two largest positive changes in net income. In that scenario, net income is down 1.5 percent instead of 9.6%.

Other observations suggest some softening, though not as much as the overall numbers would have you believe. Most major financial metrics fell by a few percentage points (capex, opex, cash, inventory, liabilities). Operating cash flow fell by a more alarming 13 percent, although debt fell too. Income tax payments jumped 37.8 percent. See Figure 3, below.

What does this tell us?  What should you look for as earnings season continues?  

Our takeaway is that you should look for companies to continue cleaning up their balance sheets as the year winds down and impacting the profits on the income statement as a consequence. Calcbench will continue to update our earnings tracker at the end of every week for the next few weeks, as quarterly reports come into the database. 

If you’d like to conduct your own analysis at home, Calcbench subscribers with an active subscription can use this link to the file. If you need one (and who doesn’t, really, when swift access to real-time data is so important?), contact us at us@calcbench.com.