S&P 500 Q3 2024 earnings outlook: growth continues amid challenges
The S&P 500 is poised for its fifth consecutive quarter of earnings growth, with a projected 4.6% increase in Q3 2024. However, downward revisions and sector-specific challenges paint a complex picture for investors.
Earnings growth momentum continues
The S&P 500 is expected to maintain its positive earnings trajectory in the third quarter (Q3) of 2024. Analysts project a 4.6% year-over-year (YoY) increase in earnings, marking the fifth consecutive quarter of growth. This trend underscores the resilience of large-cap US companies in the face of ongoing economic uncertainties.
Revisions and guidance paint a mixed picture
Despite the overall positive outlook, some caution is warranted. The Q3 2024 earnings estimate from FactSet has seen a 3.8% downward revision since June 30, with eight sectors experiencing lowered projections. The Energy sector has faced the most significant downgrade.
Corporate guidance for the quarter reflects this uncertainty:
- 60 S&P 500 companies have issued negative EPS guidance
- 50 S&P 500 companies have provided positive EPS outlooks
Sector performance: Winners and losers
The earnings landscape for Q3 2024 reveals clear sector divergences:
- Top performers: Information Technology, Health Care, and Communication Services are expected to lead with the highest year-over-year earnings growth.
- Challenged sector: The Energy sector is anticipated to report the largest earnings decline compared to the previous year.
Revenue growth remains positive
While earnings growth is crucial, revenue performance provides additional insight into corporate health. The S&P 500 is projected to deliver 4.8% YoY revenue growth in Q3 2024, with ten sectors expected to contribute positively to this increase.
Profit margins hold steady
The estimated net profit margin for the S&P 500 in Q3 2024 stands at 12.2%. This figure matches both the previous quarter and the year-ago period, suggesting stable cost management across the index.
Looking ahead: Analyst optimism for future growth
Analysts maintain a bullish outlook for the coming years:
- 2024: 10% projected earnings growth
- 2025: 15.1% projected earnings growth
Valuation considerations
The forward 12-month P/E ratio for the S&P 500 currently sits at 21.6. This valuation metric exceeds both the 5-year average (19.5) and the 10-year average (18.0), indicating that the market may be pricing in future growth expectations.
The bottom line
Analysts project a 9.4% increase in the S&P 500 price over the next 12 months. While this forecast suggests continued optimism, investors should remain mindful of the complex factors influencing corporate earnings and market performance in the current economic environment.
Key earnings to watch
Earnings season will be dominated by a number of key companies, many of which are popular with IG clients. Below we look at these names, their expected earnings, and how well they have performed against estimates over the last two years.
The table also looks at the expected price move on earnings day based on options pricing, as well as the average move on results day. It also covers the current valuation, and how it compares to the five-year average.
This information has been prepared by IG, a trading name of IG Markets 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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