Resilient Growth amid Shifting Landscapes
As the Q1 earnings season unfolded, a picture of resilient profitability emerged, showcasing not only steady growth rates but also an evolving trend of positive revisions. While positive revenue surprises were not as frequent, the expansion of margins surpassed expectations.
Robust Performance Among S&P 500 Members
Earnings for the reported 461 S&P 500 members in Q1 soared by +4.8% from the previous year, accompanied by a +4.1% increase in revenues. Impressively, 77.4% surpassed EPS estimates, with 59.7% beating revenue estimates.
Continued Growth Trajectory
The +4.8% Q1 earnings growth rate for the 461 index members showcased a modest acceleration, attaining +11.4% after factoring in the Energy sector and Bristol Myers’s one-time charge. Projections for 2024 Q2 foresee an even brighter outlook with a +9.1% earnings growth and +4.5% higher revenues.
Positive Revisions Trend
In recent weeks, a palpable uptick in overall revisions trend has been observed, reflecting a consistent improvement. Sectors like Tech and Retail have long enjoyed positive estimate revisions, with half of the 16 Zacks sectors now surpassing initial earnings estimates set at the beginning of the year.
Embracing Change: Sector-specific Reflections
Noteworthy shifts have been noted in the Energy sector’s earnings outlook, culminating in a discussion around the ‘Magnificent 7’ stocks. While challenges may loom over Tesla and Apple due to negative revisions, the positive trend for the remaining members, especially Nvidia, is promising.
Forecasting the Future
Charting the evolution of earnings estimates for sectors and the S&P 500 index unveils a promising trajectory, with expected margins rebounding and driving the bulk of 2024’s earnings growth. The Tech sector is poised to be a key driver of these gains given current market trends.
