Immediate Earnings Insights Released
Chicago, IL – October 24, 2024 – Zacks Director of Research, Sheraz Mian, states, “Total S&P 500 earnings are currently expected to be up +3.0% from the same period last year on +4.9% higher revenues.”
Investor Focus: What to Expect from the “Magnificent 7” Earnings?
This excerpt comes from this week’s Earnings Trends report. Access the full report for comprehensive historical data and estimates by clicking here>>>
Key Earnings Highlights:
- Total Q3 earnings for 120 S&P 500 members reporting by October 23rd show a +1.9% increase on +4.2% higher revenues, with 79.2% surpassing EPS estimates and 63.3% exceeding revenue estimates.
- This growth represents a slowdown compared to the first half of the year, but revenue growth aligns with recent trends.
- When factoring in results from the 120 members alongside remaining estimates, total S&P 500 earnings for Q3 are projected to rise +3.0% year-over-year, with +4.9% higher revenues.
- Earnings for the ‘Magnificent 7’ companies are expected to jump +16.2% compared to last year, supported by +13.6% increased revenues. This follows a +35.2% growth in Q2, while excluding the ‘Mag 7’, the growth for the rest of the index is forecasted to decline by -0.1%.
The Magnificent 7’s Earnings Impact
Attention now shifts to the Tech sector and the Mag 7, with five companies—Apple AAPL, Amazon AMZN, Meta META, Alphabet GOOGL, and Microsoft MSFT—set to report Q3 results next week.
Although the Mag 7 stocks led the market earlier, recent months have shown a decline in their performance. This may be due to investor concerns over escalating AI-driven capital costs without clear profit strategies.
Only Nvidia and Meta have maintained momentum; the other five members have lagged behind market trends.
Upcoming Q3 results provide these companies a chance to present their narratives, which is critical for Alphabet, Microsoft, and Amazon, particularly regarding AI developments.
Regardless of these challenges, the Mag 7 continue to report robust profitability growth, collectively expected to generate $112.4 billion in earnings for Q3, with revenues reaching $487.3 billion. This reflects a year-over-year earnings increase of +16.2% and a +13.6% revenue growth.
The Mag 7 are projected to represent 21.3% of total S&P 500 earnings in Q3. Notably, without their significant earnings contributions, the rest of the S&P 500 would show modest negative earnings.
Overview of Earnings Trends
Combining reported figures with estimates for pending reports, total earnings of the S&P 500 for Q3 are currently expected to rise +3.0% compared to last year on +4.9% higher revenues.
If not for the drag from the Energy sector, which sees a decline of -25.6%, expected earnings growth would improve to +5.3%. Conversely, excluding the strong performance from the Tech sector, the overall earnings for the index would fall by -0.3% (with the Tech sector growing by +11.7%).
The earnings growth rate is expected to enhance in the upcoming quarters.
Looking ahead to Q4 of 2024, total S&P 500 earnings are projected to rise by +9.1%, coupled with +5.3% increased revenues. This marks a +10.9% earnings increase if Energy sector declines are factored out.
Although estimates for the quarter have begun to decline, the extent of negative revisions is less severe compared to the previous Q3 period.
This year’s earnings growth of +7.4% alongside minimal revenue growth of +1.9% highlights weakness particularly in the Finance sector. Excluding Finance, earnings growth goes up to +6.4%, while revenue growth shifts to +4.2%. Thus, approximately half of this year’s earnings increases stem from revenue improvements, with margin gains contributing to the other half.
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