Negative Earnings Revisions Hit S&P 500 Ahead of Q3 Reports

Earnings estimates for Q3 2024 show a significant decline across S&P 500 sectors, with the Energy sector facing the most substantial losses. The Tech sector remains a rare positive amid widespread downward revisions, indicating potential volatility in stock prices.

Date: 07-09-2024

AI Rating: 4

The excerpt outlines several critical trends affecting S&P 500 earnings estimates ahead of the Q3 earnings season. Notably, estimates for Q3 2024 have significantly declined, reversing previous positive developments observed in earlier quarters. This negative revision trend has impacted 14 out of 16 Zacks sectors, indicating a widespread issue rather than isolated challenges.

Pivotal points from the report include:

Earnings Growth: Total S&P 500 earnings are presently expected to rise by +3.9% year-over-year, down from +6.9% in July. This reduction reflects a deteriorating outlook as the Q3 earnings approach.
Revenue Growth: The anticipated revenue increase is projected at +4.7%, underscoring persistent top-line growth despite earnings falling short of prior estimates.
Sector-Specific Trends: The Tech sector stands out with an expected earnings increase of +10.9%, marking the fifth consecutive quarter of double-digit growth, which is vital as, excluding Tech, the overall earnings growth would be only +1.1%.
Negative Contributions: The Energy sector is facing a significant decline in earnings, projected at -14.3%, which is expected to exert downward pressure on overall net margins.
Implied EPS: The report specifies an implied Earnings Per Share (EPS) of $233.43 for the S&P 500 index, based on current price-to-earnings ratios, indicating a projected earnings landscape going forward.

This analysis highlights a concerning trend for many sectors, particularly Energy and Conglomerates, which may lead to volatility in stock prices as investors adjust expectations. The resilient performance of the Tech sector offers a counterbalance, but aggregate S&P performance might remain pressured by the significant declines in other sectors.

Stocks: UAL AAL UNP