In This Article:
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:
-
The Q1 earnings season will be less about what companies earned in the first quarter of 2025 and more about sizing up the earnings impact of the emerging tariff and macroeconomic backdrop. Pre-announcements and guidance from some of the early reporting companies suggest that most companies may be forced to withdraw or lower their earlier guidance given the tariff-induced uncertainty.
-
Guidance is always the most important aspect of any earnings season, but it will be an even more significant part of the Q1 reporting cycle.
-
Total 2025 Q1 earnings for the S&P 500 index are expected to be up +5.8% from the same period last year on +3.8% higher revenues, which would follow the +14.1% earnings growth on +5.7% revenue growth in the preceding period.
-
Concerning year-over-year earnings growth, 8 of the 16 Zacks sectors are expected to enjoy positive earnings growth, with Medical (+33.6% growth), Utilities (+15.0%), Transportation (+8.6%), and Tech (+12.5%) as the major growth drivers.
Earnings Outlook Gets Cloudy as Uncertainty Hits
The guidance headlines from Walmart WMT and Delta Air Lines DAL are a sign of things to come as we head into the Q1 earnings season. The magnitude of uncertainty is so high that most management teams that already provide explicit guidance will likely either withdraw the outlook altogether or lower the bound of their guided range.
You would recall that back in January, at the time of its 2024 Q4 earnings release, Delta expected this year to be a new company record. Delta had walked some of the earlier bullishness back in its early March pre-announcement when it noted a decelerating trend in corporate sales; they have now withdrawn the full-year outlook.
Walmart’s lower earnings guidance for the current quarter (fiscal quarter ending in April) reflects ‘price investments’ and an unfavorable merchandise mix, both reflecting the impact of tariffs and consumer spending. We had been seeing this in the revisions trend already, with estimates steadily coming down.
Tech Remains a Growth Driver
The Tech sector has been a significant growth driver in recent quarters, and we saw the same trend at play in 2024 Q4. For Q1, Tech sector earnings are expected to be up +12.5% from the same period last year on +10.2% higher revenues, the 7th quarter in a row of double-digit earnings growth.