Given continuing concerns in the market about inflation, what is the S&P 500 reporting for a net profit margin for Q4?
The blended net profit margin for the S&P 500 for Q4 2024 is 12.1%, which is below the previous quarter’s net profit margin, but above the year-ago net profit margin and above the 5-year average (11.6%).
In fact, this quarter marks the 3rd consecutive quarter that the S&P 500 is reporting a net profit margin above 12%. The last time the index reported three straight quarters of net profit margins above 12% was Q4 2021 through Q2 2022.
At the sector level, seven sectors are reporting a year-over-year increase in their net profit margins in Q4 2024 compared to Q4 2023, led by the Financials (18.9% vs, 13.4%) sector. On the other hand, four sectors are reporting a year-over-year decrease in their net profit margins in Q4 2024 compared to Q4 2023, led by the Energy (7.4% vs. 10.4%) sector.
Five sectors are reporting net profit margins in Q4 2024 that are above their 5-year averages, led by the Financials (18.9% vs. 16.6%) and Information Technology (26.1% vs. 24.0%) sectors. On the other hand, six sectors are reporting net profit margins in Q4 2024 that are below their 5-year averages, led by the Materials (8.9% vs. 11.1%), Energy (7.4% vs. 9.4%), and Health Care (7.7% vs. 9.6%) sectors.
Four sectors are reporting a quarter-over-quarter increase in their net profit margins in Q4 2024 compared to Q3 2024, led by the Information Technology (26.1% vs. 23.0%) sector. On the other hand, six sectors are reporting a quarter-over-quarter decrease in their net profit margins in Q4 2024 compared to Q3 2024, led by the Utilities (13.0% vs. 14.9%) and Consumer Discretionary (8.0% vs. 9.9%) sectors.
It is interesting to note that analysts believe net profit margins for the S&P 500 will improve through the first half of 2025. As of today, the estimated net profit margins for Q1 2025 and Q2 2025 are 12.5% and 13.0%, respectively.
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