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Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
Q4 earnings for the S&P 500 index are currently expected to be down -0.2% from the year-earlier level on +2.3% higher revenues, which would follow the +3.5% earnings growth in 2023 Q3 on +2.0% higher revenues.
Earnings estimates for Q4 have been steadily coming down since the quarter got underway, with the current -0.2% growth pace down from +5.5% in early October. This is a bigger decline in earnings estimates compared to what we saw in the comparable periods for the first three quarters of 2023.
The negative revisions trend for Q4 is fairly broad-based, with earnings estimates for 11 of the 16 Zacks sectors coming down since the quarter got underway.
Q4 earnings estimates have come down the most for the Transportation, Construction, Basic Materials, conglomerates, Aerospace, Consumer Discretionary, and Tech sectors.
For 2023 Q4, total S&P 500 earnings are currently expected to be -0.2% below the year-earlier period on +2.3% higher revenues. This would follow the +3.5% increase in index earnings in 2023 Q3 on +2% higher revenues.
Earnings estimates for Q4 have been steadily coming down since the quarter got underway, as the chart below shows.
Image Source: Zacks Investment Research
This is a bigger decline in quarterly estimates compared to what we had seen in the comparable periods for either of the preceding two quarters, a reversal of the favorable revisions trend we have spotlighted in this space since April 2023.
Not only is there a bigger magnitude of cuts to Q4 estimates, but the pressure is also widespread, with estimates for 11 of the 16 Zacks getting cut since the start of the period. The biggest cuts to estimates have been for the Transportation, Construction, Conglomerates, Consumer Discretionary, Technology, and Medical sectors.
On the positive side, Q4 estimates have been raised since the quarter got underway for 5 sectors, with the most significant upward adjustments to estimates for the Utilities, Industrial Products, Autos, Finance, and Energy sectors.
The Utilities sector typically doesn’t figure prominently in discussions of earnings trends, but analysts have raised estimates for a number of utility companies. Consolidated Edison (ED - Free Report) , for example, is currently expected to earn $0.95 per share in Q4. This is up from $0.87 per share that analysts expected Consolidated Edison to earn a month back and $0.81 per share expected three months back. A.O. Smith (AOS - Free Report) and Emerson Electric (EMR - Free Report) are examples of industrial companies enjoying positive estimate revisions.
Estimates for full-year 2024 have been coming down as well. You can see the pressure on full-year 2024 earnings estimates in the chart below, which shows the aggregate earnings estimates for the S&P 500 index since mid-May 2024.
Image Source: Zacks Investment Research
The chart below shows the overall earnings picture on a quarterly basis.
Image Source: Zacks Investment Research
As you can see from these quarterly earnings-growth expectations, the growth picture is expected to steadily improve over the next few quarters.
Below, we show the overall earnings picture for the S&P 500 index on an annual basis.
Image Source: Zacks Investment Research
Given the expected moderation in the U.S. economy’s growth trajectory as a result of the cumulative effects of Fed tightening, these estimates likely need to come down. Some of that downward adjustment is already happening, as we showed earlier. In any case, there is no recession in this outlook.
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Q4 Earnings Loom: What to Expect
Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
For 2023 Q4, total S&P 500 earnings are currently expected to be -0.2% below the year-earlier period on +2.3% higher revenues. This would follow the +3.5% increase in index earnings in 2023 Q3 on +2% higher revenues.
Earnings estimates for Q4 have been steadily coming down since the quarter got underway, as the chart below shows.
Image Source: Zacks Investment Research
This is a bigger decline in quarterly estimates compared to what we had seen in the comparable periods for either of the preceding two quarters, a reversal of the favorable revisions trend we have spotlighted in this space since April 2023.
Not only is there a bigger magnitude of cuts to Q4 estimates, but the pressure is also widespread, with estimates for 11 of the 16 Zacks getting cut since the start of the period. The biggest cuts to estimates have been for the Transportation, Construction, Conglomerates, Consumer Discretionary, Technology, and Medical sectors.
On the positive side, Q4 estimates have been raised since the quarter got underway for 5 sectors, with the most significant upward adjustments to estimates for the Utilities, Industrial Products, Autos, Finance, and Energy sectors.
The Utilities sector typically doesn’t figure prominently in discussions of earnings trends, but analysts have raised estimates for a number of utility companies. Consolidated Edison (ED - Free Report) , for example, is currently expected to earn $0.95 per share in Q4. This is up from $0.87 per share that analysts expected Consolidated Edison to earn a month back and $0.81 per share expected three months back. A.O. Smith (AOS - Free Report) and Emerson Electric (EMR - Free Report) are examples of industrial companies enjoying positive estimate revisions.
Estimates for full-year 2024 have been coming down as well. You can see the pressure on full-year 2024 earnings estimates in the chart below, which shows the aggregate earnings estimates for the S&P 500 index since mid-May 2024.
Image Source: Zacks Investment Research
The chart below shows the overall earnings picture on a quarterly basis.
Image Source: Zacks Investment Research
As you can see from these quarterly earnings-growth expectations, the growth picture is expected to steadily improve over the next few quarters.
Below, we show the overall earnings picture for the S&P 500 index on an annual basis.
Image Source: Zacks Investment Research
Given the expected moderation in the U.S. economy’s growth trajectory as a result of the cumulative effects of Fed tightening, these estimates likely need to come down. Some of that downward adjustment is already happening, as we showed earlier. In any case, there is no recession in this outlook.