,
Brian Gilmartin, CFA
Summary
- Q4 ’23 ended with a +10.1% growth rate for S&P 500 EPS, so it’s possible we could get to 10% in Q1 ’24, but the fact is that S&P 500 earnings are pretty healthy regardless.
- Financials have been performing very well. Credit losses are lower, and the regulatory issues seemed to have eased.
- The sharpest negative revisions are only in energy (but from late December ’23, and in fact has improved since early April ’24), and health care.
A lot of the social media and CNBC crowd like to work with quarterly earnings, which is fine, but I've always thought that it was too narrow a field: one thing learned doing this weekend post for years is to look at quarterly results, but watch how full-year, calendar, "expected" sector growth rates change after earnings news.
First though, after bottoming on April 12 '24, here's how the expected Q1 '24 S&P 500 EPS growth rate has changed since then:
- 5/10/24: +7.4%
- 5/3/24: +7.1%
- 4/26/24: +5.6%
- 4/19/24: +2.9%
- 4/12/24: +2.7%
Q4 '23 ended with a +10.1% growth rate for S&P 500 EPS, so it's possible we could get to 10% in Q1 '24, but the fact is that S&P 500 earnings are pretty healthy regardless.
S&P 500 data:
- The forward 4-quarter estimate slipped this week to $252.99 from $253.25.
- The P/E on the forward estimate is 20.6 this week vs 20.25 last week.
- The S&P 500 "earnings yield is 4.85% this week versus 4.94% last week.
- 450 S&P 500 companies have reported for Q1 '24 and the "upside surprise" is still at 8.3%, 200 bp's higher than Q4 '23's, +6.3%.
Which sectors have shown improved growth rates for 2024 ?
The highlighted sectors of consumer discretionary, financial services and communication services are all seeing higher expected growth rates since late December '23 and then again since April 1 '24.
Financials have been performing very well. Credit losses are lower, and the regulatory issues seemed to have eased.
Technology has lost some of its relative strength in terms of the stock market, so the lack of any improvement in the "tech sector" expected growth rate for 2024, may be one reason. Nvidia (NVDA) reports 5/22, or a week from next Wednesday and semi's are leading the AI charge, so let's see how the tech sector expected growth rate changes after May 22, '24.
The sharpest negative revisions are only in energy (but from late December '23, and in fact has improved since early April '24), and health care.
Health care is expected to bounce back in '25 (not shown).
Here's one final data point that's interesting: Expected 2025 S&P 500 EPS
Note (click on the spreadsheet) how the expected 2025 EPS figure of $278.12 (as of this week), has added $2 since late March '24 and $4 since the start of the year.
The pattern is usually the opposite: there is usually a mild downward progression.
None of this is advice or a recommendation. Past performance is no guarantee of future results. Investing can involve loss of principal even for short time horizons. All EPS and revenue data sourced within is from LSEG.com.
Summary/conclusion
Two giant retailers report this coming week - Home Depot (HD) and Walmart (WMT) - as well as Cisco Systems (CSCO) which is scheduled to report Wednesday, May 15, '24.
S&P 500 earnings continue to reflect a positive business environment for S&P 500 companies. Even the 2026 S&P 500 EPS estimate has been revised higher from $300 to $312 in the last 6 weeks. Eventually something will change the trend. It's been remarkable how strong the US economy remains, at least reflected in S&P 500 earnings.
Nothing's really changed. It's been a remarkable run of solid economic data.
Thanks for reading.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
Brian Gilmartin, CFA
Brian Gilmartin, is a portfolio manager at Trinity Asset Management, a firm he founded in May, 1995, catering to individual investors and institutions that werent getting the attention and service deserved, from larger firms. Brian started in the business as a fixed-income / credit analyst, with a Chicago broker-dealer, and then worked at Stein Roe & Farnham in Chicago, from 1992 - 1995, before striking out on his own and managing equity and balanced accounts for clients. Brian has a BSBA (Finance) from Xavier University, Cincinnati, Ohio, (1982) and an MBA (Finance) from Loyola University, Chicago, January, 1985. The CFA was awarded in 1994. Brian has been fortunate enough to write for the TheStreet.com from 2000 to 2012, and then the WallStreet AllStars from August 2011, to Spring, 2012. Brian also wrote for Minyanville.com, and has been quoted in numerous publications including the Wall Street Journal.
