At this late stage of the second quarter earnings season, the performance of S&P 500 companies relative to expectations continues to be mixed. On the one hand, the percentage of S&P 500 companies reporting positive earnings surprises is above average levels. On the other hand, the magnitude of earnings surprises is below average levels. However, the index is still reporting higher earnings today relative to the end of the quarter. Overall, the index is reporting its highest (year-over-year) earnings growth rate since Q4 2021.
Overall, 91% of the companies in the S&P 500 have reported actual results for Q2 2024 to date. Of these companies, 78% have reported actual EPS above estimates, which is above the 5-year average of 77% and above the 10-year average of 74%. In aggregate, companies are reporting earnings that are 3.5% above estimates, which is below the 5-year average of 8.6% and below the 10-year average of 6.8%. Historical averages reflect actual results from all 500 companies, not the actual results from the percentage of companies that have reported through this point in time.
During the past week, a negative EPS surprise reported by a company in the Communication Services sector, partially offset by positive EPS surprises reported by companies in multiples sectors (led by the Health Care and Financials sectors) was the largest contributor to the decrease in the overall earnings growth rate for the index over this period. Since June 30, upward revisions to EPS estimates and positive EPS surprises reported by companies in the Financials, Consumer Discretionary, and Information Technology sectors, partially offset by downward revisions to EPS estimates and negative EPS surprises reported by companies in the Communication Services and Energy sectors, have been the largest contributors to the increase in the overall earnings growth rate for the index over this period.
As a result, the index is reporting lower earnings for the second quarter today relative to the end of last week, but still reporting higher earnings for the second quarter today relative to the end of the quarter. The blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings growth rate for the second quarter is 10.8% today, compared to an earnings growth rate of 11.4% last week and an earnings growth rate of 8.9% at the end of the second quarter (June 30).
If 10.8% is the actual growth rate for the quarter, it will mark the highest year-over-year earnings growth rate reported by the index since Q4 2021 (31.4%). It will also mark the fourth consecutive quarter of year-over-year earnings growth for the index.
Nine of the eleven sectors are reporting year-over-year growth for Q2. Five of these nine sectors are reporting double-digit growth: Utilities, Information Technology, Financials, Health Care, and Consumer Discretionary. On the other hand, two sectors are reporting a year-over-year decline in earnings, led by the Materials sector.
In terms of revenues, 59% of S&P 500 companies have reported actual revenues above estimates, which is below the 5-year average of 69% and below the 10-year average of 64%. In aggregate, companies are reporting revenues that are 0.5% above the estimates, which is below the 5-year average of 2.0% and below the 10-year average of 1.4%. If 0.5% is the final number for the quarter, it will mark the lowest revenue surprise percentage reported by the index since Q4 2019 (0.5%). Again, historical averages reflect actual results from all 500 companies, not the actual results from the percentage of companies that have reported through this point in time.
During the past week, positive and negative revenue surprises reported by companies in multiple sectors offset each other, resulting in no change to the overall revenue growth rate for the index over this period. Since June 30, positive revenue surprises reported by companies in the Financials and Health Care sectors have been the largest contributors to the increase in the overall revenue growth rate for the index over this period.
As a result, the index is reporting flat revenues for the second quarter today relative to the end of last week, but still reporting higher revenues today relative to the end of the quarter. The blended revenue growth rate for the second quarter is 5.2% today, compared to a revenue growth rate of 5.2% last week and a revenue growth rate of 4.7% at the end of the second quarter (June 30).
If 5.2% is the actual revenue growth rate for the quarter, it will mark the highest revenue growth rate reported by the index since Q4 2022 (5.4%). It will also mark the 15th consecutive quarter of revenue growth for the index.
Ten sectors are reporting year-over-year growth in revenues, led by the Information Technology, Energy, and Communication Services sectors. On the other hand, the Materials sectors is the only sector reporting a year-over-year decline in revenues.
Looking ahead, analysts expect (year-over-year) earnings growth rates of 5.4% and 15.7% for Q3 2024, and Q4 2024, respectively. For CY 2024, analysts are calling for (year-over-year) earnings growth of 10.2%.
The forward 12-month P/E ratio is 20.2, which is above the 5-year average (19.4) and above the 10-year average (17.9). However, this P/E ratio is below the forward P/E ratio of 21.0 recorded at the end of the second quarter (June 30).
During the upcoming week, nine S&P 500 companies (including three Dow 30 components) are scheduled to report results for the second quarter.
Q2 2024: Scorecard
Q2 2024: Growth
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