The third quarter was a turning point, yanking us out of an earnings recession that put up three straight quarters of negative growth. Supply chains loosened up, allowing more orders to be fulfilled and converted to sales. And the U.S. economy — at the consumer and corporate levels — proved to be more resilient than many thought possible in a world of higher interest rates. Top-line strength was provided by the communication services, financials and consumer discretionary sectors, with 82%, 76% and 71%, respectively, of companies beating consensus sales estimates. Bottom-line beats were largely driven by technology and communication services (again), with both sectors seeing 91% of their companies exceed Wall Street’ earnings projections. Next was industrial, where 84% of companies beat profit estimates. At an aggregate sector level, consumer discretionary earnings came in 18.3% higher than the Street consensus, followed by communication services (9.2% above) and financials (9% higher). The quarter was not without its headwinds. Oil prices, a major input cost for nearly all companies, were up, eating into corporate profits. Meanwhile, the strong U.S. dollar hurt those companies selling into foreign markets as it makes U.S. goods more expensive (and less attractive) to foreign buyers. The good news is that both headwinds seem to have weakened in the current quarter, which should bode well fourth-quarter results. As always, we’re wrapping up the season with a review of results for all 33 of our Club holdings. These quarterly report cards are not the end-all, be-all for analysis. But we believe stock prices ultimately follow the underlying business fundamentals of companies and having an idea of which companies did well and which didn’t can help when thinking about which stocks to pick at first in a pull back, or let go of in a broad-based rally. Similar to prior quarters, we grouped company results into one of four categories. The companies in each category…
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