Are the “Magnificent 7” the Top Contributors to Earnings for the S&P 500 for Q4?

A number of the companies in the “Magnificent 7” have seen their stock price hit record-high levels in recent weeks, which is helping to drive the value of the S&P 500 higher. Are companies in the “Magnificent 7” also expected to drive earnings higher for the S&P 500 for the fourth quarter?

The answer is yes. Six of the seven companies in the “Magnificent 7” are projected to be the top six positive contributors to year-over-year earnings for the S&P 500 for Q4 2023: NVIDIA, Amazon.com, Meta Platforms, Alphabet, Microsoft, and Apple. In aggregate, these six companies are expected to report year-over-year earnings growth of 53.7% for the fourth quarter. Excluding these six companies, the blended (combines actual and estimated results) earnings decline for the remaining 494 companies in the S&P 500 would be -10.5% for Q4 2023. Overall, the blended earnings decline for the entire S&P 500 for Q4 2023 is -1.4%.

Five of these top six contributors are scheduled to report actual results for Q4 this week on January 30 or February 1: Alphabet, Amazon.com, Apple, Meta Platforms, and Microsoft.

The only company in the “Magnificent 7” that is not a positive contributor to year-over-year earnings growth for the S&P 500 for Q4 2023 is Tesla. On January 24, the company reported a year-over-year decline in non-GAAP EPS of 40% for the fourth quarter ($0.71 vs. $1.19).

It is interesting to note that four of these six companies are also projected to be the top four contributors to earnings growth for the S&P 500 for Q1 2024: NVIDA, Amazon.com, Meta Platforms, and Alphabet. In aggregate, these four companies are projected to report year-over-year earnings growth of 79.7% for Q1 2024. Excluding these four companies, the remaining 496 companies in the S&P 500 would be projected to report year-over-year earnings growth of 0.3% for Q1 2024. Overall, the estimated earnings growth rate for the entire S&P 500 for Q1 2024 is 4.6%.

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