At this early stage, the second quarter earnings season for the S&P 500 is off to a mixed start. 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. At the sector level, a significant increase in earnings for the Financials sector is being partially offset by a substantial decrease in earnings for the Energy sector. As a result, the index overall is reporting higher earnings for the second 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 since Q4 2021.
Overall, 14% of the companies in the S&P 500 have reported actual results for Q2 2024 to date. Of these companies, 80% 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 5.5% 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, positive EPS surprises reported by companies in the Financials sector, partially offset by downward revisions to EPS estimates for companies in the Energy sector, were the largest contributors to the increase 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 sector, again partially offset by downward revisions to EPS estimates for companies in the Energy 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 second 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 second quarter is 9.7% today, compared to an earnings growth rate of 9.1% last week and an earnings growth rate of 8.9% at the end of the second quarter (June 30).
If 9.7% 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.
Eight of the eleven sectors are reporting (or are projected to report) year-over-year growth. Four of these eight sectors are reporting double-digit growth: Communication Services, Health Care, Information Technology, and Financials. On the other hand, three sectors are reporting a year-over-year decline in earnings, led by the Materials sector.
In terms of revenues, 62% 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 1.7% above the estimates, which is below the 5-year average of 2.0% but above 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, downward revisions to revenue estimates for companies in the Energy sector, partially offset by positive revenue surprises reported by companies in the Financials sector, were the largest contributors to the slight decrease in the overall revenue growth rate for the index over this period. Since June 30, positive revenue surprises reported by companies in the Financials sector have been mainly offset by downward revisions to revenue estimates for companies in the Energy sector, resulting in no change to the overall revenue growth rate for the index over this period.
As a result, the index is reporting lower revenues for the second quarter today relative to the end of last week but reporting flat revenues relative to the end of the quarter. The blended revenue growth rate for the second quarter is 4.7% today, compared to a revenue growth rate of 4.8% last week and a revenue growth rate of 4.7% at the end of the second quarter (June 30).
If 4.7% is the actual revenue growth rate for the quarter, it will mark the 15th consecutive quarter of revenue growth for the index.
Nine sectors are reporting (or are projected to report) year-over-year growth in revenue, led by the Information Technology sector. On the other hand, two sectors are reporting a year-over-year decline in earnings, led by the Materials sector.
Looking ahead, analysts expect (year-over-year) earnings growth rates of 7.4% and 17.0% for Q3 2024, and Q4 2024, respectively. For CY 2024, analysts are calling for (year-over-year) earnings growth of 11.0%.
The forward 12-month P/E ratio is 21.2, which is above the 5-year average (19.3) and above the 10-year average (17.9). This P/E ratio is also above the forward P/E ratio of 21.0 recorded at the end of the second quarter (June 30).
During the upcoming week, 138 S&P 500 companies (including seven Dow 30 components) are scheduled to report results for the second quarter.
Q2 2024: Scorecard
Q2 2024: Growth
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