Investing.com -- The Q4 earnings season is nearing its conclusion in the U.S., with 70% of companies having reported, while Europe is still in the early stages, with only 43% of companies releasing results, according to JPMorgan analyst Mislav Matejka.
So far, earnings have exceeded expectations, with U.S. companies reporting 11% year-over-year EPS growth and European firms seeing 2% growth.
"EPS growth is coming in stronger than initially expected," the JPMorgan analyst noted, with positive surprise factors of 5% in the U.S. and 4% in Europe.
Despite strong earnings, the bank says U.S. stocks have not been rewarded for beating estimates.
"Stocks that are beating estimates are underperforming on the day, while stocks missing estimates are being penalized in line with historical average," JPMorgan pointed out.
In contrast, Japan is said to be seeing the strongest earnings momentum, with 21% year-over-year EPS growth and 62% of Topix companies beating estimates.
The sectoral performance has been mixed. "Commodity sectors, including Energy and Materials, as well as Industrials, are coming in weak," JPMorgan said.
However, Consumer Discretionary, Financials, Communication Services, and Healthcare have posted strong results in the U.S., with revenue growth at 5% year-over-year, says Matejka.
He added that Europe has followed a similar pattern, with Energy and Materials dragging down overall performance, while Discretionary and Healthcare have been relative bright spots.
While still a meaningful driver of US earnings growth, the contribution of Mag-7 is diminishing,” said JPMorgan.
They added that "the spread between Mag-7 and S&P500 ex Mag-7 earnings growth has reduced to the smallest in the last 7 quarters," indicating a broader market contribution to earnings growth.