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S&P 500 Earnings: Q4 EPS Upside Surprise Is +6.4% – Robust Once Again

Published 02/05/2024, 02:24 AM
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Even though the earnings reports from Amazon (NASDAQ:AMZN), META (NASDAQ:META) and Apple (NASDAQ:AAPL) aren’t in the data because LSEG cuts off the earnings and market data as of Thursday night’s market close, the upside surprise for Q4 ’23 S&P 500 EPS closed the week at +6.4%, versus the +7.2% from Q3 ’23. That might even improve again next week, but rather than speculate let’s see how the data falls out.

The revenue upside surprise this week for Q4 ’23 S&P 500 improved to +1.2%, versus Q3 ’23’s +0.9%.

Not bad given how cautious the general sentiment was coming into the Q4 ’23 earnings season.

How has 2024 Guidance Impacted Full-Year Sector EPS Growth Estimates?S&P 500 EPS Growth Rates By Sector

Technology has held up very well for full-year ’24 as has communication services (will probably look even better next week after META’s EPS estimates get revised), while consumer discretionary is likely seeing a tug of war between Amazon (positively) and Tesla (NASDAQ:TSLA) (negatively) in terms of EPS changes.

S&P 500 Q1-24 Sector EPS Growth Rates

This chart is the changes for Q1 ’24 earnings, which will begin being reported in mid-April ’24. It’s following the typical pattern, meaning lower revisions as we approach the quarter. Readers hopefully remember how negative the Street was watching the reduction in Q4 ’23 EPS estimates from October through December ’23.

Energy and materials are really pulling down Q1 ’24 EPS estimates.S&P 500 EPS Revenue Expected Growth Rates

Open this table and look at the first column. Look at the heavy downward revisions to S&P 500 Q4 ’23 EPS estimates all throughout the 4th quarter of ’23.

Now look at the latest week: actual growth is back up to +7.8% as of this morning, for Q4 ’23 S&P 500 EPS growth.

It started at +10% on 9/30/23, fell to a low of +4.4% as of January 12 ’24 and now the increase to +7.8% as of 2/2/24. (That’s a typical pattern for S&P 500, albeit maybe the drop in Q4 ’23 was a little greater than expected.

Here’s what this blog wrote on January 1, 24 about the upside surprise for Q4 ’23.

With GDP growth and this morning’s jobs growth, it’s no wonder S&P 500 earnings are cooperating.

That being said, take it a month at a time.

S&P 500 Data:

  • The forward 4-quarter estimate (FFQE) is $241.97 versus last week’s $242.61 and early January 24’s $243.98;
  • The PE on the forward estimate is a little over 20x, same as last week, with expected S&P 500 EPS growth in ’24 of 9% – 10%;
  • The S&P 500 earnings is below 5% again at 4.88% (not a big fan of being below 5%);
  • The Q4 ’23 bottom-up EPS estimate for the S&P 500 is now $55.36 versus 12/31’23’s $54.69 and 9/30/23’s $58.14;
  • The upside surprise data has already been noted – it’s still quite healthy. Let’s see if it improves again next week;

Conclusion:

With mega-cap technology earnings this week, it’s another healthy earnings season, although I do have to note that many of the megacap tech companies were lapping very easy comp’s from Q4 ’22.

Readers can see the results looking at the S&P 500 and Nasdaq 100 this week, with the S&P 500 +1.38% and the Nasdaq 100 +1.25% respectively. Both indices are trading at all-time-highs. The Nasdaq Composite is still about 600 points shy of November ’21, 16,200 peak.

There aren’t a lot of companies that report next week that clients are involved in.

I have to tell readers: financial stocks seem stymied by the yield curve and the outlook for monetary policy. Each time they look like they want to run, strong economic data knocks them back. JP Morgan, (JPM), clients 2nd largest equity holding keeps looking like it wants to break out above $175 and then peters out. The yield curve inversion is not terribly friendly for the banks.

None of this is advice or a recommendation. Past performance is no guarantee or suggestion of future results. Investing can involve the loss of principal. All S&P 500 EPS and revenue data is sourced from LSEG London Stock Exchange Group, unless otherwise noted. Readers should gauge their own appetite for portfolio volatility and adjust accordingly.

As always, thank you for reading.

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