The S&P 500 has shown positive quarterly earnings trends, with forward estimates nearing $267 per share and a price-to-earnings (PE) ratio of 21x. Key data for Q3 and Q4 2024 reveal that energy sector earnings are expected to drop 20%, after a similar 33% decline in Q3 2023, despite typically lower benchmarks. In contrast, the technology sector leads with expected EPS growth of 15%. The forward four-quarter estimate decreased to $257.47 this week but is projected to rise to $267 next week as Q3 financial results are released.
S&P 500 data from LSEG show the forward earnings yield slipping to 4.48%, down from 4.54% last week. This represents a steady decline from the August peak of 4.87%. Notably, this quarter’s upside earnings surprise fell to 4.6%, a reduction from the five previous quarters where results exceeded expectations. Analysts anticipate the forward 4-quarter estimate to rise to around $267 next week as the quarterly figures transition from Q3 2024 – Q2 2025 to Q4 2024 – Q3 2025, showing an expected $10 increase per quarter.
Energy sector results continue to be of interest, with EPS projected to decline 20% in Q3, paired with a 3.7% drop in revenue. This follows tough comparisons from Q3 2023, when energy sector EPS fell 33% and revenue dropped 17%. Despite this, Q3 2024 results do not anticipate any recovery in energy earnings.
Technology is expected to outperform in Q3 2024 with a year-over-year EPS growth of 15%. However, the sector faces tough comparisons with Q3 and Q4 of 2023, when technology EPS grew by 15% and 24%, respectively. Analysts note that high-PE technology names may see some compression as growth moderates, although there is little expectation for a repeat of the sharp declines seen in early 2023.
Year-to-date, the top 10 mega-cap stocks in the S&P 500, including Microsoft, Amazon, and Alphabet, have seen some stagnation, reflecting subtle shifts within the index. Microsoft, for example, remains 10% or $40 below its all-time high.
Recent developments in China also attracted attention this week. Both the iShares Emerging Markets ETF (EEM) and Vanguard’s Emerging Markets ETF (VWO) saw significant increases in YTD returns. VWO’s YTD return jumped from 11.05% last week to 18.31%, while EEM’s return increased from 9.41% to 16.72% in the same period. This improvement is significant given that China accounts for 30% of the emerging market benchmark.
While China’s economic performance remains a point of focus, some investors are cautious due to the country’s economic structure, which includes state-owned enterprises (SOEs), and concerns around long-term investment viability in the region.
All S&P 500 earnings and revenue data are sourced from LSEG. This report is for informational purposes only and is not intended as investment advice. Past performance is not indicative of future results. Readers should evaluate their own risk tolerance and portfolio goals before making any investment decisions.
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