A Glimpse into the Earnings Landscape

Chicago, IL – March 28, 2024 – Zacks Director of Research Sheraz Mian emphasizes the crucial role of the Tech sector in driving positive earnings growth, preventing a dip into negative territory for the broader market index.

Deciphering the Earnings Data

Note: The insights provided are excerpted from the latest Earnings Trends report. For a comprehensive overview with historical data and projections for upcoming periods, access the full report.

Key Highlights:

• Projections indicate a 2.5% increase in S&P 500 earnings for Q1 of 2024 compared to the same period last year, with revenue expected to rise by 3.5%. This follows a previous quarter where earnings grew by 6.7% and revenues by 3.9%.
• The Tech sector continues to be a significant contributor to growth in Q1 of 2024. Without the robust earnings from this sector, the overall market index would have seen a slight decline.
• While estimates for Q1 of 2024 have been adjusted downwards since the beginning of the quarter, the scale of these revisions remains favorable compared to previous periods.
• Half of the 16 Zacks sectors are predicted to experience positive earnings growth in Q1, with Tech (19.6% growth), Retail (12.3%), Cons. Discretionary (11.0%), and Utilities (7.3%) leading the way.

Looking ahead to the earnings season for Q1 of 2024, recent trends and future expectations point towards a continuation of positive momentum initiated in 2023 Q3. This shift to positive growth was driven by Tech sector performance and improved net margins.

Notably, the Tech sector is poised to maintain its role as a key growth engine in the upcoming quarters, with expectations of further margin improvements.

Forecasts suggest a 2.5% year-over-year earnings increase for Q1 of 2024, accompanied by a 3.5% rise in revenues. Notably, the scale of negative estimate revisions for Q1 demonstrates a favorable trend compared to the same period in 2023 Q4.

Since the commencement of Q1, estimates have been revised downward for 10 of the 16 Zacks sectors, with Energy, Basic Materials, Transportation, Autos, and Aerospace industries experiencing significant cuts. Conversely, positive revisions have been noted for Retail, Tech, and Utilities sectors among others.

The positive earnings outlook for the Tech sector signals strong fundamental support for its market performance. Aligning individual stock valuations within the sector may vary, but the overall sectoral momentum is expected to persist as long as the revision trajectory remains favorable.

For the Tech sector as a whole, Q1 of 2024 is anticipated to witness a 19.6% increase in earnings alongside an 8.3% growth in revenues. These figures continue the sector’s robust performance from 2023 Q4.

Meta (META) and Nvidia (NVDA) are standout performers, with expected Q1 earnings growth hitting 58.8% and an impressive 487.5% respectively when compared to the previous year. Exclude these contributions, and the Tech sector’s earnings growth would have been a modest 7.3% instead of the projected 19.6%.

Both Meta and Nvidia are witnessing an enhancement in their earnings outlook, with estimates consistently on the rise. For instance, Meta’s 2024 Zacks Consensus EPS has surged by 13.6% in the last three months, while Nvidia’s estimate has seen a 20.6% increase over the same period.

Anticipated earnings growth for this year is primarily dependent on reversing last year’s downward trend in margins, with prospects looking at reaching the 2022 level overall, with the Tech sector leading the charge.

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Conclusion:

The trend of favorable Tech sector earnings projections signals a solid foundation for continued market momentum. While individual stock valuations may vary, the sector’s overall performance outlook remains promising as long as positive revisions persist.

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The opinions expressed are those of the author and do not necessarily align with Nasdaq, Inc.