Encouraging Trends in Earnings Growth
As Q1 earnings results continue to pour in, a promising narrative unfolds. Total earnings from the 440 S&P 500 companies that have reported stand at a commendable +5.0% from the prior year, supported by a solid +4.2% surge in revenues. Even more impressive, 78.0% of these entities beat EPS estimates, with 60.9% surpassing revenue projections.
Acceleration in Earnings Pace
This growth trajectory represents an encouraging acceleration compared to past periods. Once we factor in the Energy sector’s contributions and Bristol Myers’s one-time charge, the +5% earnings growth jumps to a robust +11.9%.
Future Projections
The outlook for Q2 of 2024 shines even brighter, with expectations of a +9.2% surge in S&P 500 earnings from the prior year, fueled by a +4.5% increase in revenues. Notably, estimates have been on an upward trend since early April, with the current growth pace topping the previous +8.7% mark.
Yearly Forecast
Zooming out to the full-year perspective for 2024, optimism prevails. S&P 500’s collective earnings are predicted to expand by +8.9%, rebounding from a slight dip last year. Excluding the hefty Tech sector, which anticipates a remarkable +15.9% growth, the rest of the index is set to see a solid +6.3% rise.
Industry Resilience
With sectors like Tech and Retail enjoying continuous positive estimate revisions, industry resilience stands out. Currently, half of the Zacks sectors exhibit heightened aggregate earnings, reflecting ongoing positive momentum.
Steady Sector Evolution
One sector that has stood out with a favorable earnings outlook is Energy, showcasing a promising trend. Moreover, attention is now turning towards the ‘Magnificent 7’ stocks for their evolving earnings potential.
The complete earnings landscape for these top-performing entities is depicted in the annular chart below.
Image Source: Zacks Investment Research
The aggregated earnings forecast for 2024 now stands at a notable $443.9 billion, marking subsequent ascents from previous weeks. Notably, while Tesla and Apple have faced downward revisions, the strength displayed by the remaining ‘Magnificent 7’ members, particularly Nvidia, more than compensates for this.
The following graphs illustrate the evolution of sector earnings and the S&P 500 index estimated earnings for the 2024 fiscal year.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
Margin Growth Prospects
The expected earnings surge for this year hinges significantly on margin improvements after facing contractions last year. The forecast is for aggregate net margins to rebound to 2022 levels, with the Tech sector spearheading much of the gains.
With such positive industry trends and earnings momentum unfolding, investors are eagerly anticipating a robust growth phase ahead.
