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:
With more than 80% of the earnings reports already in, we can safely say that it has been a good reporting cycle, with the growth pace showing a notable accelerating trend and companies comfortably beating consensus estimates.
Total earnings for the 403 S&P 500 companies that have reported results are up +12.0% from the same period last year on +5.5% higher revenues, with 77.9% beating EPS estimates and 65.8% beating revenue estimates.
The reporting focus is shifting to the Retail sector, where the brick-and-mortar operators are on deck to report results in the days ahead. However, more than half of the Zacks Retail sector companies have already reported Q4 results.
For the 54.5% of Zacks Retail sector companies that have reported Q4 results already, primarily comprised of e-commerce operators and restaurant players, total earnings are up +45.9% from the same period last year on +8.5% higher revenues, with 66.7% beating EPS estimates and 72.2% beating revenue estimates. Excluding Amazon’s results from the reported Retail sector numbers, the Q4 earnings and revenue growth rates adjust down to -0.9% and +6.2%, respectively.
Retail Sector Earnings in Focus
The Q4 reporting focus shifts to the Retail sector in the days ahead as the brick-and-mortar operators start coming out with quarterly results. Walmart WMT will kick things off for the space, with the big question on investors’ minds being the stock’s ability to sustain its impressive momentum. The stock is up +15.4% this year, handily outperforming the S&P 500 index’s +4.1% gain, Amazon’s AMZN +3.1% gain, and Target’s TGT -3.3% decline in that time period.
Driving Walmart’s stock market momentum has been the company’s strong operating performance, reflecting the boost that the business is receiving from its e-commerce unit. The digital offering is allowing the company to offer a variety of convenient delivery and pick-up options, which, combined with Walmart’s greater indexing to groceries and reputation for value, is helping it gain market share, particularly among higher-income households.
This seamless integration of Walmart’s digital offering with its enormous brick-and-mortar footprint has enabled the company to offer a genuine competitive challenge to Amazon.
The chart below shows the one-year performance of Walmart shares relative to the S&P 500 index, Amazon, and Target.
Zacks Investment Research
Image Source: Zacks Investment Research
Unlike Walmart, Target has a much smaller grocery exposure and indexes far more towards discretionary goods and products, the demand for which has been under pressure in the post-Covid period. While there are some other company-specific headwinds as well, the soft outlook for discretionary merchandise has been the primary reason for Target’s underperformance.
Is The Tech Sector’s Earnings Outlook Starting to Shift?
The Tech sector has been a significant growth driver in recent quarters, and the trend is expected to continue in 2024 Q4 and beyond. For Q4, Tech sector earnings are expected to be up +24.2% from the same period last year on +11.0% higher revenues, the 6th quarter in a row of double-digit earnings growth.
This would follow the sector’s +22.7% earnings growth on +11% higher revenues in 2024 Q3. As the chart below shows, the sector’s growth trajectory is expected to continue in the coming quarters.
Zacks Investment Research
Image Source: Zacks Investment Research
The Tech sector has also been among those few sectors that have steadily enjoyed an improving earnings outlook, with estimates steadily increasing. However, the more recent data on this count appears to show a shift in the revisions trend, as the chart below of aggregate 2025 earnings estimates for the sector shows.
Zacks Investment Research
Image Source: Zacks Investment Research
The Earnings Big Picture
The chart below shows expectations for 2024 Q4 in terms of what was achieved in the preceding four periods and what is currently expected for the next three quarters.
Zacks Investment Research
Image Source: Zacks Investment Research
As you can see in the above chart, total S&P 500 earnings for the current period (2025 Q1) are currently expected to be up +7.0% from the same period last year on +4.1% high revenues.
Estimates for the period have been coming down since the quarter got underway, as the chart below shows.
Zacks Investment Research
Image Source: Zacks Investment Research
The revisions trend is broad-based, with estimates for 15 of the 16 sectors down since the start of January (Medical is the only sector whose estimates have increased). Sectors suffering the most significant cuts to estimates include Conglomerates, Aerospace, Construction, Basic Materials, Autos, and others. Unlike other recent periods, estimates for the Tech sector have also been under pressure.
The chart below shows the overall earnings picture on an annual basis.
Zacks Investment Research
Image Source: Zacks Investment Research
As you can see, the expectation is for double-digit earnings growth in each of the next two years, with the number of sectors enjoying strong growth notably expanding from the narrow base we have been seeing lately.
In fact, 2025 is expected to have nearly all Zacks sectors enjoy earnings growth, with 7 of the 16 Zacks sectors expected to produce double-digit earnings growth. Unlike the last two years, when the Mag 7 group drove all or most of the aggregate earnings growth, we will have double-digit S&P 500 earnings growth in 2025, even without the contribution from this mega-cap group.
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