# Q2 Earnings Forecast Shows Mixed Trends for S&P 500

**Overview of Q2 Earnings Expectations**

Total S&P 500 earnings for the June quarter are projected to rise by 5.5% compared to last year, driven by a 3.8% increase in revenues. This marks a period of heightened pressure on estimates, more substantial than seen in recent periods.

**Sector-Specific Earnings Updates**

As the quarter unfolds, earnings estimates have declined for 15 of the 16 Zacks sectors, with Aerospace being the lone exception. The Tech sector’s estimates have decreased but have stabilized recently.

**Wrap-Up of Q1 Earnings Cycle**

The Q1 earnings reporting cycle is nearly complete, with results from fewer than 20 S&P 500 companies still pending. So far, the 477 S&P 500 members that have reported indicate a total earnings increase of 11.4% from last year, alongside a 4.4% rise in revenues. Among these, 74.2% surpassed EPS estimates, and 62.9% exceeded revenue forecasts.

**Q1 Retail Sector Performance**

In the Retail sector, 28 out of 33 companies in the S&P 500 reported Q1 earnings that rose 11.2% year-over-year, with 5% higher revenues. However, only 60.7% beat EPS estimates, and 57.1% surpassed revenue estimates.

The Zacks Research method classifies the retail sector independently, encompassing online vendors like Amazon, restaurant operators like McDonald’s, and traditional retailers such as Walmart and Target.

**Earnings and Revenue Trends in Retail**

Retail sector companies have struggled to meet earnings and revenue targets historically. Without Amazon’s contribution, the sector’s earnings growth of 11.2% drops to a decrease of 5.0%. Annual earnings growth for the sector is expected to be 4.1% this year but falls significantly without Amazon’s influence.

The sector faces challenges due to margin pressures, particularly from e-commerce logistics costs. Recent charts indicate that Retail sector margins, excluding Amazon, have been declining since 2021.

**Outlook for Q2 2024 and Beyond**

Entering Q2 came with increased tariff uncertainty, which has affected earnings estimates. Current expectations for S&P 500 earnings point to a 5.5% rise, supported by a 3.8% revenue increase. The magnitude of estimate cuts is more significant this quarter than in previous ones.

Estimates have dropped for 15 of the 16 sectors, with significant declines observed in Transportation, Autos, Energy, and others. Only Aerospace saw a positive revision. Tech and Finance sectors also revised their earnings expectations downward. The Tech sector anticipates a Q2 earnings increase of 11.9% with respective revenue growth of 9.9%.

Tech Sector Earnings Revisions Stabilize Amid Uncertainty

Recent revisions in the Tech sector are now stabilizing, although they remain below early April levels. This trend is evident in the accompanying charts.

Image Source: Zacks Investment Research

Expectations for full-year 2025 also show a stabilizing trend in the Tech sector, as illustrated in the second chart.

Image Source: Zacks Investment Research

Both charts illustrate that Tech sector estimates are no longer facing the downward pressure experienced previously. This sector is significant, accounting for nearly one-third of total S&P 500 earnings.

Earnings Landscape Overview

The chart below shows expectations for Q1 2025 compared to previous periods, highlighting current estimates for the upcoming four quarters.

Image Source: Zacks Investment Research

The S&P 500’s annual earnings picture is depicted in the following chart.

Image Source: Zacks Investment Research

Although this year’s earnings estimates are under pressure, changes for the following two years have been minimal so far.

Stocks have recovered losses linked to tariffs, though the issue remains unresolved. While some less pessimistic economic projections have emerged, macro uncertainty persists and may affect future earnings estimates, particularly regarding tariffs.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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