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:
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The setup for the Q2 earnings season, whose early reports have started trickling in, is one of continued resilience coupled with a steadily improving outlook. Given the favorable revisions trend ahead of this reporting cycle, we will be looking for further improvement in the earnings outlook.
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For 2024 Q2, S&P 500 earnings are expected to be up +8.6% from the same period last year on +4.7% higher revenues. This will be the highest earnings growth rate since the +9.9% growth rate in the first quarter of 2022.
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Earnings growth for the Energy sector is on track to turn positive in Q2 after remaining in negative territory over the preceding four quarters.
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Q2 earnings for the ‘Magnificent 7’ companies are expected to be up +25.5% from the same period last year on +13.2% higher revenues. Excluding the ‘Mag 7’, Q2 earnings growth for the rest of the index drops to +5% (from +8.6%).
Regular readers of our earnings commentary are familiar with our favorable take on the overall earnings picture. A big part of our positive view reflects developments on the revisions front, both for the current period (2024 Q2) as well as the remainder of the year.
As noted earlier, the current +8.6% earnings growth expected for the S&P 500 index is barely down from where the growth rate stood at the start of the period, as shown in the chart below.
Image Source: Zacks Investment Research
In addition to the Energy sector, Q2 estimates have increased for the Tech, Utilities, Transportation, and Autos sectors, helping partly offset negative cuts for the other sectors.
The revisions trend for the Tech sector has been positive for a while now, which is important since the sector alone is on track to bring in almost 30% of all S&P 500 earnings over the coming four-quarter period.
The 2024 Q2 quarter will be the fourth consecutive quarter of robust Tech sector earnings growth, with total earnings for the sector expected to be up +15.8% from the same period last year.
For full-year 2024, Tech sector earnings are expected to be up +17.4%, followed by another strong showing expected next year.
The chart below shows how the aggregate earnings total for the Tech sector has evolved over the past year.
Image Source: Zacks Investment Research
Some of the major Tech stocks that have led the market’s gains this year are also experiencing positive estimate revisions.