S&P 500 Earnings Season Update: January 31, 2025

At this stage of the fourth quarter earnings season, S&P 500 companies are reporting mixed results relative to expectations. While the percentage of S&P 500 companies reporting positive earnings surprises is above the 10-year average, the magnitude of earnings surprises is below the 10-year average. However, the index is still reporting higher earnings for the fourth quarter today relative to the end of last week and relative to the end of the quarter. In addition, the index is reporting its highest year-over-year earnings growth rate for Q4 2024 in three years.

Overall, 36% of the companies in the S&P 500 have reported actual results for Q4 2024 to date. Of these companies, 77% have reported actual EPS above estimates, which is equal to the 5-year average of 77% but above the 10-year average of 75%. In aggregate, companies are reporting earnings that are 5.0% above estimates, which is below the 5-year average of 8.5% and below the 10-year average of 6.7%. 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 EPS surprises reported by companies in the Communication Services and Information Technology sectors, partially offset by negative EPS surprises reported by companies in the Industrials sector, were the largest contributors to the increase in the overall earnings growth rate for the index over this period. Since December 31, positive EPS surprises reported by companies in the Financials and Communication sectors, partially offset by negative EPS surprises reported by companies in the Industrials sector, 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 higher earnings for the fourth quarter today relative to the end of last week and 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 fourth quarter is 13.2% today, compared to an earnings growth rate of 12.3% last week and an earnings growth rate of 11.8% at the end of the fourth quarter (December 31).

If 13.2% 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 sixth consecutive quarter of year-over-year earnings growth for the index.

Seven of the eleven sectors are reporting year-over-year earnings growth for Q4. Five of these seven sectors are reporting double-digit growth: Financials, Communication Services, Information Technology, Consumer Discretionary, and Utilities. On the other hand, four sectors are reporting a year-over-year decline in earnings for the quarter. Two of these four sectors are reporting a double-digit decline: Energy and Industrials.

In terms of revenues, 63% 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 0.9% above the estimates, which is below the 5-year average of 2.1% and below the 10-year average of 1.4%. 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 revenue surprises reported by companies in multiples sectors (led by the Energy and Health Care sectors) were the largest contributors to the increase in the overall revenue growth rate for the index over this period. Since December 31, positive revenue surprises reported by companies in the Financials, Consumer Discretionary, Health Care, and Energy 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 blended revenue growth rate for the fourth quarter is 5.0% today, compared to a revenue growth rate of 4.6% last week and a revenue growth rate of 4.6% at the end of the fourth quarter (December 31).

If 5.0% is the actual revenue growth rate for the quarter, it will mark the 17^th consecutive quarter of revenue growth for the index.

Eight sectors are reporting year-over-year growth in revenue for Q4, led by the Information Technology sector. On the other hand, three sectors are reporting a year-over-year decline in revenue for Q4, led by the Industrials sector.

Looking ahead, analysts expect (year-over-year) earnings growth rates of 10.1% and 10.9% for Q1 2025 and Q2 2025, respectively. For CY 2025, analysts are predicting (year-over-year) earnings growth of 14.3%.

The forward 12-month P/E ratio is 22.0, which is above the 5-year average (19.8) and above the 10-year average (18.2). This P/E ratio is also above the forward P/E ratio of 21.5 recorded at the end of the fourth quarter (December 31).

During the upcoming week, 131 S&P 500 companies (including 5 Dow 30 components) are scheduled to report results for the fourth quarter.

Q4 2024: Scorecard

Q4 2024: Growth

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