The S&P 500 is reporting earnings growth of 5.8% for Q3 2024. However, for Q4 2024, the estimated earnings growth rate for the index is expected to more than double to 12.0%. If 12.0% 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%). What is driving the expected improvement in earnings growth in Q4 2024?
At the sector level, eight of the eleven sectors are predicted to report year-over-year earnings growth in Q4 2024. Six of these eight sectors are expected to report double-digit earnings growth for the quarter: Financials (38.9%), Communication Services (20.7%), Information Technology (13.9%), Utilities (12.9%), Health Care (12.6%), and Consumer Discretionary (12.5%).
At the industry level, the five industries that are expected to be the top contributors to earnings growth for the quarter are Banks (181%), Semiconductors & Semiconductor Equipment (34%), Pharmaceuticals (64%), Interactive Media & Services (25%), and Broadline Retail (48%). Excluding these five industries, the estimated earnings growth rate for the S&P 500 for the fourth quarter would fall to 1.6% from 12.0%.
The Banks industry is projected to be the largest contributor to earnings growth for the S&P 500 for the fourth quarter. A large number of companies in this industry are benefitting from easy comparisons to weaker (GAAP) earnings reported in the year-ago quarter due to significant charges related to FDIC special assessments and other items that were included in their GAAP EPS. At the company level, Truist Financial ($0.88 vs. -$3.85), Citigroup ($1.21 vs. -$1.16), Bank of America ($0.78 vs. $0.35), JPMorgan Chase ($3.88 vs. $3.04), and Wells Fargo ($1.33 vs. $0.86) are predicted to be the top contributors to earnings growth for the Banks industry for the fourth quarter.
The Semiconductors & Semiconductor Equipment industry is projected to be the second-largest contributor to earnings growth for the S&P 500 for the fourth quarter. At the company level, NVIDIA ($0.84 vs. $0.52), Micron Technology ($1.73 vs. -$0.95), and Broadcom ($1.46 vs. $1.10) are predicted to be the top contributors to earnings growth for the Semiconductors & Semiconductor Equipment industry for the fourth quarter.
The Pharmaceuticals industry is expected to be the third-largest contributor to earnings growth for the S&P 500 for the fourth quarter. Similar to the Banks industry, a number of companies in this industry are benefitting from easy comparisons to weaker (non-GAAP) earnings reported in the year-ago quarter due to various charges that were included in their non-GAAP EPS. At the company level, Merck & Company ($1.84 vs. $0.03), Eli Lilly & Company ($5.47 vs. $2.49), and Pfizer ($0.48 vs. $0.10) are predicted to be the top contributors to earnings growth for the Pharmaceuticals industry for the fourth quarter.
The Interactive Media & Services industry is expected to be the fourth-largest contributor to earnings growth for the S&P 500 for the fourth quarter. At the company level, Alphabet ($2.11 vs. $1.64) and Meta Platforms Technology ($6.72 vs. $5.33) are predicted to be the top contributors to earnings growth for the Interactive Media & Services industry for the fourth quarter.
The Broadline Retail industry is expected to be the fifth-largest contributor to earnings growth for the S&P 500 for the fourth quarter. At the company level, Amazon.com ($1.47 vs. $1.00) is predicted to be the top contributor to earnings growth for the Broadline Retail industry for the fourth quarter.
It is interesting to note that analysts believe double-digit earnings growth will continue for the S&P 500 through all four quarters of 2025. The estimated earnings growth rates for Q1 2025 through Q4 2025 are 12.7%, 12.1%, 15.3%, and 17.0%.
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.