S&P 500 Earnings Season Shows Mixed Results, but Index Reports Highest Growth Since Q4 2021
The S&P 500 is reporting a mixed bag of results for the second quarter of 2024, with companies exceeding earnings estimates at a higher-than-average rate, but the magnitude of those surprises is below average, according to a note published by FactSet on Friday.
Despite this mixed picture, the index is reporting higher earnings for the second quarter compared to the end of the quarter and the end of last week, achieving its highest year-over-year earnings growth rate since Q4 2021.
"The blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings growth rate for the second quarter is 9.8% today, compared to an earnings growth rate of 9.6% last week and an earnings growth rate of 8.9% at the end of the second quarter (June 30)," observes FactSet.
As of today, 41% of S&P 500 companies have reported actual results for the second quarter, with 78% exceeding earnings estimates. This beats the five-year average of 77% and the 10-year average of 74%. However, while companies are reporting earnings that are 4.4% above estimates, this is below the five-year average of 8.6% and the 10-year average of 6.8%.
The financial data firm also notes that the market is reacting differently to positive and negative earnings surprises, rewarding positive surprises less than average and punishing negative surprises more than average.
Eight out of eleven sectors are reporting year-over-year earnings growth, with four sectors reporting double-digit growth: Communication Services, Information Technology, Financials, and Health Care.
The note also highlights positive trends in revenue growth, with 60% of S&P 500 companies reporting actual revenues above estimates. This translates to a blended revenue growth rate of 5% for the second quarter, which would mark the 15th consecutive quarter of revenue growth for the index. Ten sectors are reporting year-over-year revenue growth, led by the Information Technology sector.
Looking ahead, analysts are expecting year-over-year earnings growth rates of 6.8% and 16.7% for Q3 2024 and Q4 2024, respectively. For CY 2024, analysts are forecasting a year-over-year earnings growth rate of 10.9%.
"Despite the rise in the earnings growth rate since June 30, the market is rewarding positive EPS surprises reported by S&P 500 companies less than average and punishing negative EPS surprises reported by S&P 500 companies more than average," states FactSet.