Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
- For 2024 Q4, total S&P 500 earnings are currently expected to be up +7.5% from the same period last year on +4.7% higher revenues.
- Earnings estimates for the period have steadily come down since the quarter got underway, with the current +7.5% growth rate down from +9.8% in early October.
- Q4 earnings are expected to be above the year-earlier level for 9 of the 16 Zacks sectors, with Medical (earnings growth of +16%), Tech (+14.5%), Finance (+10.7%), and Utilities (+9.1%) as the sectors enjoying significant earnings growth.
- Q4 earnings are expected to be below the year-earlier level for 7 of the 16 Zack sectors, with the Energy (earnings decline of -20.7%), Aerospace (-17.9%), Conglomerates (-14.3%) as the notable decliners.
- Q4 earnings for the ‘Magnificent 7’ group of companies are expected to be up +20.5% from the same period last year on +12.2% higher revenues. Excluding the ‘Mag 7’ contribution, Q4 earnings for the rest of the index would be up only +3.6% (vs. +7.5%).
Mixed Retail Sector Earnings
The Q3 earnings season is now effectively behind us, with the focus lately on Retail sector quarterly releases. Overall, consumer spending trends appear stable, as we noted earlier while discussing Walmart’s WMT results.
Walmart has benefited from its heavier indexing to groceries and other must-have merchandise that helps draw in consumers. Another catalyst for Walmart’s strong performance in recent quarters has been its ability to gain market share among higher-income consumers. This trend reflects a combination of the company’s efficient digital offerings and its reputation for value.
The stable spending trends in the aggregate notwithstanding, some discretionary spending areas continue to suffer, as we noted while discussing Target’s TGT results some time back, and is also likely at play in Foot Locker’s FL weak showing.
In recent days, we have discussed the Retail sector’s earnings scorecard and how the sector’s Q3 results stack up relative to the other recent periods in section 1 of this report.
The Earnings Big Picture
Looking at Q3 as a whole, combining the actual results that have come out with estimates for the still-to-come companies, total earnings for the S&P 500 index are now expected to be up +8.2% from the same period last year on +5.7% higher revenues.
The Q3 earnings growth pace would improve to +10.6% had it not been for the Energy sector drag (decline of -22.9% for Energy). On the other hand, quarterly earnings for the index would be up +2.9% once the Tech sector’s hefty contribution is excluded (earnings growth of +22.0% for the Tech sector).
The quarterly earnings growth pace is expected to improve from next quarter onwards. You can see this in the chart below, which shows the overall earnings picture on a quarterly basis.
Image Source: Zacks Investment Research
For the current period (2024 Q4), total S&P 500 earnings are expected to be up +7.5% on +4.7% higher revenues. Q4 earnings would be up +9.5% had it not been for the Energy sector drag.
Estimates for the period have started coming down since the quarter got underway. Still, the pace and magnitude of negative revisions are less than we had seen in the comparable period of Q3. You can see this in the chart below that shows how Q4 estimates have evolved in recent weeks.
Image Source: Zacks Investment Research
The chart below shows the overall earnings picture on an annual basis.
Image Source: Zacks Investment Research
As you can see, the expectation is for double-digit earnings growth in each of the next two years, with the number of sectors enjoying strong growth notably expanding from the narrow base we have been seeing lately.
Tech sector earnings are expected to be up +17.0% in 2025, which would follow the sector’s +19.8% earnings growth in 2024. But even excluding the Tech earnings, S&P 500 earnings would be up +11.0% in 2025, with three of the 16 Zacks sectors expected to enjoy double-digit earnings growth.
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