S&P 500 Earnings Season Update: July 26, 2024

At close to the mid-point of the second quarter earnings season, the S&P 500 is reporting mixed results. 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. On the one hand, the index is reporting higher earnings for the second quarter today relative to the end of the quarter and reporting its highest (year-over-year) earnings growth rate since Q4 2021. On the other hand, the market is rewarding positive EPS surprises reported by S&P 500 companies less than average and punishing negative EPS surprises reported by S&P 500 companies more than average.

Overall, 41% 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 4.4% 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 multiple sectors (led by the Industrials and Communication Services sectors) were mostly offset by downward revisions to EPS estimates for a company in the Health Care sector, resulting in a small 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, partially offset by downward revisions to EPS estimates for companies in the Energy and Health Care 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 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 9.8% today, compared to an earnings growth rate of 9.6% last week and an earnings growth rate of 8.9% at the end of the second quarter (June 30).

Despite the rise in the earnings growth rate since June 30, the market is rewarding positive EPS surprises reported by S&P 500 companies less than average and punishing negative EPS surprises reported by S&P 500 companies more than average.

If 9.8% 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.

Eight of the eleven sectors are reporting year-over-year growth. Four of these eight sectors are reporting double-digit growth: Communication Services, Information Technology, Financials, and Health Care. On the other hand, three sectors are reporting a year-over-year decline in earnings, led by the Materials sector.

In terms of revenues, 60% 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 1.1% above the estimates, which is below the 5-year average of 2.0% 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 multiple sectors (led by the Health Care and Consumer Discretionary sectors), partially offset by negative revenue surprises reported by companies in the Financials sector, were the largest contributors to the increase in the overall revenue growth rate for the index over this period. Since June 30, positive revenue surprises reported by companies in the Financials, Health Care, and Consumer Discretionary sectors, partially offset by downward revisions to revenue estimates for companies in the Energy sector, 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 higher revenues for the second quarter today relative to the end of last week and relative to the end of the quarter. The blended revenue growth rate for the second quarter is 5.0% 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 5.0% is the actual revenue growth rate for the quarter, it will mark the 15^th consecutive quarter of revenue growth for the index.

Ten sectors are reporting year-over-year growth in revenues, led by the Information Technology sector. 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 6.8% and 16.7% for Q3 2024, and Q4 2024, respectively. For CY 2024, analysts are calling for (year-over-year) earnings growth of 10.9%.

The forward 12-month P/E ratio is 20.6, which is above the 5-year average (19.3) 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, 171 S&P 500 companies (including ten Dow 30 components) are scheduled to report results for the second quarter.

Q2 2024: Scorecard

Q2 2024: Growth

This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.