Analysts Expect S&P 500 Earnings Growth to Improve in 1st Half of 2024

For the third quarter, the S&P 500 is reporting (year-over-year) earnings growth of 4.1%. However, for the fourth quarter, analysts are now projecting (year-over-year) earnings growth of only 3.2%. Do analysts believe (year-over-year) earnings growth rates will continue to decline sequentially into the first half of 2024?

The answer is no. For Q1 2024, analysts are predicting (year-over-year) earnings growth of 6.7%. For Q2 2024, analysts are projecting earnings growth of 10.5%. While these growth rates are below the expectations on September 30, they are still above the current growth rates for Q3 2023 and Q4 2023. What sectors and companies are driving the expected increase in earnings growth for the first half of 2024?

At the sector level for Q1 2024, nine of the eleven sectors are predicted to report year-over-year earnings growth, led by the Communication Services (19.9%), Consumer Discretionary (16.5%), and Information Technology (15.2%) sectors. At the company level for Q1 2024, NVIDIA ($3.91 vs. $1.09), Amazon.com ($0.66 vs. $0.31), Meta Platforms ($3.60 vs. $2.20), and Alphabet ($1.49 vs. $1.17) are expected to be the largest contributors to earnings growth for the S&P 500 for the quarter. If these four companies were excluded, the estimated earnings growth rate for the S&P 500 for Q1 2024 would fall to 3.2% from 6.7%.

At the sector level for Q2 2024, all eleven sectors are predicted to report year-over-year earnings growth, led by the Health Care (23.5%), Energy (21.3%), Communication Services (16.6%), and Information Technology (11.1%) sectors. At the company level for Q2 2024, Merck ($2.06 vs. $-2.06), NVIDIA ($4.17 vs. $2.70), and Meta Platforms ($4.18 vs. $2.98) are expected to be the largest contributors to earnings growth for the S&P 500 for the quarter. If these three companies were excluded, the estimated earnings growth rate for the S&P 500 for Q2 2024 would fall to 7.0% from 10.5%.

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