S&P 500 Reporting Double-Digit Earnings Growth for 4th Straight Quarter

During the past week, the (blended) earnings growth rate for the S&P 500 for the third quarter increased to 10.7% from 9.1%. If 10.7% is the actual growth rate for the quarter, it will mark the 4^th straight quarter that the index has reported double-digit (year-over-year) earnings growth. The last time the S&P 500 reported 4 consecutive quarters of double-digit earnings growth was Q1 2021 through Q4 2021. At the sector level, four sectors are reporting double-digit earnings growth for the quarter: Information Technology, Utilities, Financials, and Materials

However, the Q3 earnings growth rate for the S&P 500 has been increasing over a longer timeframe. On June 30, the estimated earnings growth rate for Q3 was 7.3%. On September 30, the estimated earnings growth rate for Q3 was 7.9%. Today, the earnings growth rate is 10.7%. Which sectors and companies have been the largest contributors to the increase in the Q3 earnings growth rate for the S&P 500 since September 30?

At the sector level, the Financials sector has been the largest contributor to the increase in earnings for the S&P 500 since September 30. Within this sector, the positive EPS surprises reported by Morgan Stanley ($2.80 vs. $2.10), Capital One Financial ($5.95 vs. $4.49), Bank of America ($1.06 vs. $1.04), JPMorgan Chase ($5.97 vs. $4.85), Chubb ($7.49 vs. $6.17), Travelers Companies ($8.14 vs. $6.39), and Goldman Sachs ($12.25 vs. $11.03) have been significant contributors to the increase in the earnings growth rate for the index since the end of the quarter. As a result, the blended earnings growth rate for the Financials sector has increased to 20.8% from 11.4% over this period.

The Information Technology sector has been the second-largest contributor to the increase in earnings for the S&P 500 since September 30. Within this sector, the positive EPS surprises reported by Microsoft ($4.13 vs. $3.67), Apple ($1.85 vs. $1.78), and Intel ($0.23 vs. $0.02) have been substantial contributors to the increase in the earnings growth rate for the index since the end of the quarter. As a result, the blended earnings growth rate for the Information Technology sector increased to 25.6% from 20.9% over this period.

The Consumer Discretionary sector has been the third-largest contributor to the increase in earnings for the S&P 500 since September 30. Within this sector, the positive EPS surprises reported by Amazon.com ($1.95 vs. $1.57) and General Motors ($2.80 vs. $2.29) have been significant contributors to the increase in the earnings growth rate for the index since the end of the quarter. As a result, the blended earnings growth rate for the Consumer Discretionary sector increased to 8.0% from -2.3% over this period.

On the other hand, the Communication Services sector has been the largest detractor to the increase in earnings for the S&P 500 since September 30. Within this sector, the negative EPS surprise reported by Meta Platforms ($1.05 vs. $6.72) has been the largest detractor to the increase in the earnings growth rate for the index since the end of the quarter. The (GAAP) actual EPS for Meta Platforms for Q3 included a one-time, non-cash income tax charge of $15.93 billion. However, the impact of the negative EPS surprise reported by Meta Platforms has been partially offset by the positive EPS surprise reported by Alphabet ($2.87 vs. $2.27). As a result, the Communication Services sector is now reporting a decline in earnings of -6.7% compared to expected earnings growth of 3.1% on September 30.

At the company level, it should be noted that the top four contributors to the increase in the earnings growth rate for the S&P 500 since September 30 are “Magnificent 7” companies (Alphabet, Amazon.com, Microsoft, and Apple), while the largest detractor to the increase in the earnings growth rate over this period is also a “Magnificent 7” company (Meta Platforms).

It is also interesting to note that analysts believe the S&P 500 will report double-digit earnings growth in four of the next five quarters. For Q4 2025 through Q4 2026, the estimated (year-over-year) earnings growth rates for the S&P 500 are 7.6%, 11.8%, 12.8%, 14.8%, and 15.9%, respectively.

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