"Adequate earnings, dismal sales."
That's how Goldman Sachs' David Kostin summed up third-quarter earnings season, now that we've heard from nearly 80% of all S&P 500 companies.
In a client note on Friday, Kostin noted that most companies have beat analysts' forecasts for profits.
However, only 21% of companies have so far beat expectations on revenues by more than one standard deviation. That's below the 10-year average of 32%.
But it's been far from a normal year for companies. The stronger dollar was expected to impact many company's foreign revenues, since their sales abroad shrank when converted back to the dollar.
And it's showing up. Revenue growth was down 2.8% as of Friday, according to RBC's Jonathan Golub. That keeps the S&P 500 on track for a third straight quarter of a decline in sales: a so-called revenue recession.
And with revenue beats becoming less frequent, investors are more likely to reward, by buying shares of, companies that beat on profits, according to Kostin.
The chart below shows that the percentage of companies missing on sales is running above the average of every quarter since 2006.
Goldman