Q4 2024 earnings season outlook and market impact
The S&P 500 is set to report its strongest earnings growth since Q4 2021, with an 11.9% year-over-year increase expected for Q4 2024.
Expected earnings growth and revisions
The S&P 500's projected 11.9% earnings growth represents a significant milestone, though analysts have moderated their expectations from the 14.5% forecast made in September. Corporate guidance has been notably cautious, with 71 companies issuing negative earnings per share (EPS) guidance, exceeding the five-year average of 56 companies.
Only 35 companies have provided positive guidance, falling short of the five-year average of 42, suggesting widespread conservative outlooks. These revisions highlight the complex economic environment companies are navigating as they enter the reporting season.
Sector-by-sector performance outlook
The S&P 500 is poised to maintain its streak of revenue growth, marking the 17th consecutive quarter of expansion with a projected 4.6% increase. Technology companies are expected to lead revenue growth, supported by ongoing digital transformation trends and strong demand for tech services.
- Financial sector: leads projected growth with an impressive 38.9% increase, driven largely by the Banking industry's favourable year-over-year (YoY) comparisons
- Communication services: expected to post 20.7% growth
- Technology sector: follows with a projected growth of 13.9%
- Utilities sector: projected to achieve double-digit growth rates above 12%
- Health care sector: projected to achieve double-digit growth rates above 12%
- Consumer discretionary sector: projected to achieve double-digit growth rates above 12%.
This broad-based growth across multiple sectors suggests a robust earnings environment despite economic uncertainties.
Market valuation considerations
The S&P 500's forward price-earnings (P/E) ratio of 21.4 exceeds its five-year average of 19.7, indicating elevated valuations in the current market. Investors using online trading platforms should consider these valuation levels when making investment decisions.
Higher valuations suggest markets have already priced in significant earnings growth expectations, which may mean that stocks will struggle in the short-term if they fail to meet forecasts. Consider using a demo account to practice trading strategies during this earnings season.
Future growth projections
Analysts maintain an optimistic outlook for 2025, projecting double-digit earnings growth across all quarters. Growth forecasts range from 12.1% to 17.0% throughout 2025, suggesting sustained corporate earnings momentum. These projections support potential opportunities in index trading. However, traders should remain mindful of the gap between projections and actual results given recent guidance trends.
How to trade during earnings season
- Research company earnings dates and analyst expectations
- Choose whether to trade or invest based on your strategy
- Open an account with us
- Monitor market reactions to earnings releases
- Place your trades according to your analysis.
Trading platform users should carefully consider position sizing and risk management during this potentially volatile earnings season.
This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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