It’s been an interesting ride for Q4 ’23 S&P 500 earnings:
After Q3 ’23’s +5% GDP growth rate, estimate revisions were higher for the most part, until early November ’23 when Treasuries started to rally and some of the economic data started to moderate.
- On 9/30/23: +12.7% EPS growth was expected for the S&P 500;
- That fell all the way to +4.4% as of 1/12/24;
- Today, the expected Q4 ’23 EPS growth rate is back to 9%, up from 7.8% last week;
S&P 500 Earnings Data
- The forward 4-quarter estimate (FFQE) for the S&P 500 rose actually increased this week to $242.77 from $241.97, probably a lot due to Amazon (NASDAQ:AMZN), META (NASDAQ:META) and Apple (NASDAQ:AAPL) reporting the night of February 1 ’24, thereby missing the cut-off for last weekend’s earnings report and falling into this weeks time slot;
- The PE on the FFQE is 20.7x this week versus 20.5x last week;
- The S&P 500 earnings yield has fallen all 6 weeks of 2024, starting with 5.19% on 1/5/24, while ending this week at 4.83%;
- The most interesting data point this week was the increase in the expected calendar 2023 EPS estimate to $224.55 from last week’s $221.14. That’s a $3 jump in one week, which is pretty unusual.
- The expected Q4 ’24 S&P 500 bottom-up EPS estimate jumped to $56.66 this week from $55.36 last week;
- The S&P 500 EPS “upside surprise” as of the end of this week was +6.8%, versus last week's +6.4%;
As strong as Q4 ’23 looks, Q1 ’24’s expected S&P 500 EPS growth has been coming down, which is really the normal pattern for earnings. Some commentators think the S&P 500 EPS “game” is rigged or manipulated, but my own experience updating this data weekly every week for the last 15 years, is that analysts tend to look for weaker forward earnings after strong quarters, and stronger forward quarters after weak ones.
Here’s the S&P 500 EPS estimate increases by calendar year the last three weeks:
2025:
- 2/9/24: $274.92
- 2/2/24: $273.66
- 1/26/24:$273.74
2024:
- 2/9/24: $243.12
- 2/2/24: $242.22
- 1/26/24: $242.61
2023:
- 2/9/24: $224.55
- 2/2/24: $221.14
- 1/26/24: $219.53
Conclusion:
S&P 500 earnings look healthy, and the upward revisions are likely to temper probably through early April ’24. Mega-cap tech and the so-called “Mag 7” really did their job for the benchmark last week.
2024’s S&P 500 EPS growth is expected to be 10% – 11% in 2024, thus with the S&P 500 trading at 20x the forward estimate, most pundits think the S&P 500 is overvalued.
Credit spreads still look contained and well-behaved. Don’t underestimate the impact of a healthy appetite for credit risk and the ability to handle investment-grade and high-yield bond issuance means for equities. It’s a positive for sure.
Coca-Cola (NYSE:KO), Coinbase (NASDAQ:COIN) and Chicago Merc (CME) are the only two stocks next week, that are followed for clients. Only KO is owned presently.
Disclaimer: None of this is intended to be advice or a recommendation. Past performance is no guarantee or even suggestion of future results. All S&P 500 EPS and revenue data is sourced from @LSEG. Reach out to tajinder.dhillon@lseg.com for information about their S&P 500 earnings service. Readers should gauge their own comfort with market volatility and adjust their portfolios accordingly.