Double-Digit Earnings Growth, High Profit Margin Projected for S&P 500 in 2018

As of December 22, the estimated earnings growth rate for the S&P 500 for calendar year 2018 is 11.8%. If 11.8% is the final growth rate for the year, it will mark the highest annual earnings growth since 2011 (12.7%). It will also mark the first time index has reported double-digit earnings growth since 2011. All 11 sectors are projected to report year-over-year growth in earnings, led by the Energy, Materials, Financials, and Information Technology sectors.

The Energy sector is expected to report the highest (year-over-year) earnings growth of all 11 sectors at 41.5%. At the sub-industry level, all six sub-industries in the sector are projected to report earnings growth: Oil & Gas Drilling (N/A due to year-ago loss), Oil & Gas Exploration & Production (300%), Oil & Gas Equipment & Services (65%), Oil & Gas Refining & Marketing (32%), Integrated Oil & Gas (23%), and Oil & Gas Storage & Transportation (20%).

The Materials sector is expected to report the second highest (year-over-year) earnings growth of all 11 sectors at 18.3%. At the industry level, all four industries in the sector are projected to report double-digit earnings growth: Construction Materials (33%), Metals & Mining (31%), Containers & Packaging (23%), and Chemicals (15%).

The Financials sector is expected to report the third highest earnings growth of all 11 sectors at 16.7%. At the industry level, all five industries in the sector are projected to report double-digit earnings growth: Diversified Financial Services (31%), Insurance (30%), Banks (14%), Consumer Finance (12%), and Capital Markets (12%).

The Information Technology sector is expected to report the fourth highest (year-over-year) earnings growth of all 11 sectors at 13.2%. At the industry level, all seven industries in this sector are projected to report earnings growth. Five of these seven industries are projected to report double-digit earnings growth: Internet Software & Services (21%), Technology Hardware, Storage, & Peripherals (16%), Semiconductors & Semiconductor Equipment (12%), IT services (11%), and Software (10%).

2018 Revenue Growth: 5.6%

The estimated (year-over-year) revenue growth rate for CY 2018 is 5.6%. All 11 sectors are expected to report year-over-year growth in revenues, led by the Information Technology sector.

The Information Technology sector is expected to report the highest (year-over-year) revenue growth of all 11 sectors at 10.4%. At the industry level, all seven industries in this sector are predicted to report revenue growth. Two of these seven industries are projected to report double-digit revenue growth: Internet Software & Services (20%) and Technology Hardware, Storage, & Peripherals (10%).

Highest Profit Margin (10.9%) Projected in 10 Years for 2018

Based on aggregate revenue and earnings estimates for the index, the projected net profit margin for the S&P 500 for CY 2018 is 10.9%. If 10.9% is the actual net profit margin for the year, it will mark the highest annual profit margin for the S&P 500 since FactSet began tracking aggregate earnings and revenue data for the S&P 500 in 2008. Nine of the 11 sectors are expected to see profit margins increase on a year-over-year basis in CY 2018.