Fourth-quarter earnings are shaping up to be the best of 2023, but there's a catch
Traders work on the floor at the New York Stock Exchange on Feb. 1, 2024.

Here's how big of a surprise corporate profits have been this earnings season: The fourth quarter is now shaping up to be the best of 2023.

Despite ongoing macroeconomic concerns that have hampered demand and weighed on consumer sentiment, almost halfway into earnings season, profits are clearly coming in far better than anybody expected.

Helping companies' bottom lines this round: easing input costs, more emphasis on cost controls and efficiencies and significantly reduced expectations.

A plethora of significant earnings beats among some very important S&P 500 companies such as Amazon , Meta , Apple , Chevron , ExxonMobil , Merck and Bristol Myers Squibb have moved the Q4 growth rate notably higher late this week.

LSEG, formerly Refinitiv, is now seeing a nearly 8% rise in earnings growth this season. That's far better than the 4.7% expected just three weeks ago, right before the big banks reported results.

Stronger-than-expected results from three sectors are particularly notable:

Energy – 90% of the companies have beat earnings estimates, with profits coming in almost 14% above expectations.

– 90% of the companies have beat earnings estimates, with profits coming in almost 14% above expectations. Health care – 85% have beat on the bottom line, with earnings coming in nearly 11% above expectations.

– 85% have beat on the bottom line, with earnings coming in nearly 11% above expectations. Tech – 84% have posted earnings beats, with earnings more than 5% above expectations.

As for the S&P 500 as a whole, Q4's current earnings per share growth rate of 7.8% exceeds the 7.5% growth seen in all of Q3 — and is now tops for the year.