Quarterly earnings season will begin in the coming weeks. The most recent report indicates that the analyst consensus anticipates annual earnings growth for the S&P 500 of 3.4% (YoY) for the first quarter of the year. If confirmed, this could mark the third consecutive quarter of YoY earnings growth for companies. However, this estimate is lower than the 5.7% YoY increase that analysts estimated at the beginning of the quarter.
Six of the eleven sectors are projected to report YoY earnings growth, led by the utilities, technology, communication services and consumer discretionary sectors. In detail, it highlights the expected 20.3% YoY earnings growth in the technology sector, where NVIDIA, Microsoft and Micron Technology have been the main contributors to this increase. In the case of the consumer discretionary sector, Amazon.com and cruise companies stand out as the main factors behind the expected growth of 15.3% YoY. On the other hand, four sectors are expected to report a YoY decline in earnings, led by the energy and materials sectors in the face of lower commodity prices. Finally, the industrial sector is expected to report an unchanged (0.0%) YoY earnings performance.
At the revenue or sales level, the consensus forecasts a 3.6% YoY increase, which is below the average revenue growth of the last 5 years (+6.9%) and below the average revenue growth of the last 10 years (+5.0%). Nonetheless, if the 3.6% expected revenue growth were to materialize, revenues would accumulate fourteen quarters of positive growth. With this combination of factors, the net income margin for the quarter would be 11.6%, practically the same as in 1Q23, although better than the 11.5% average of the last five years.
Analysts continue to project that earnings and revenues for the full year could reach increases in the order of 10.9% and 5.1%, respectively.
As is customary, JP Morgan will kick off on April 12; therefore, investors’ focus will be on the development of the season, amid a high level of optimism for the AI boom and the prospect that the first interest rate cutbacks could occur later this year.
S&P 500: expected earnings growth for the 1Q24
Source: FacSet