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:

• Total earnings for the 112 S&P 500 companies that have reported results are up +10.8% from the same period last year on +5.5% higher revenues, with 80.4% beating EPS estimates and 68.8% beating revenue estimates.

• The picture emerging from the 2024 Q4 earnings season continues to be one of strength and improving outlook, with the companies not only coming ahead of estimates but also providing reassuring guidance for the coming quarters.

• If actual 2025 earnings results turn out to be as currently expected, this will be the first time since 2018 when all 16 Zacks sectors achieved positive earnings growth (to be precise, the Zacks Autos sector had modestly negative earnings growth in 2018).

• We continue to believe that the best things that can happen this earnings season will be for management teams to validate the robust and broad-based earnings growth expected in 2025.

Notable Earnings Results

Just to feature two recent reports, the strong results from Royal Caribbean (RCL Quick QuoteRCL - Free Report) contrast with the underwhelming guidance in the Danaher Corp. (DHR Quick QuoteDHR - Free Report) report.

Royal Caribbean shares have more than doubled over the past year, and the company’s quarterly report and guidance suggest plenty of operating momentum to justify this stock market performance. Royal Caribbean’s Q4 earnings increased +34.4% from the year-earlier level on +12.9% higher revenues. While the company’s guidance represented an upside to consensus estimates, the analysts following the company noted conservatism in the numbers and wouldn’t be surprised if guidance was raised again in the coming months thanks to the all-around strength in demand.

Danaher’s results came a hair short of the estimates that reflected its pre-announcement, but the market’s bigger disappointment likely reflected the weak guidance. Shares of this maker of medical and commercial products have been laggards lately, down -2.5% this month vs. +3.2% gain for the S&P 500 index.

Tech to Remain a Key Growth Driver

The Tech sector has been a significant growth driver in recent quarters, and the trend is expected to continue in 2024 Q4 and beyond. For Q4, Tech sector earnings are expected to be up +15.2% from the same period last year on +10.3% higher revenues, the 6^th quarter in a row of double-digit earnings growth.

This would follow the sector’s +22.6% earnings growth on +11% higher revenues in 2024 Q3. As the chart below shows, the sector’s growth trajectory is expected to continue in the coming quarters.

Image Source: Zacks Investment Research

In addition to the Tech sector’s strong growth profile, the sector is also among the few sectors whose earnings outlook is steadily improving. This shows up in the revisions trend for the Tech sector for both Q4 and full year 2025.

The Earnings Big Picture

The chart below shows expectations for 2024 Q4 in terms of what was achieved in the preceding four periods and what is currently expected for the next four quarters.

Image Source: Zacks Investment Research

The chart below shows the overall earnings picture on an annual basis.

Image Source: Zacks Investment Research

As you can see, the expectation is for double-digit earnings growth in each of the next two years, with the number of sectors enjoying strong growth notably expanding from the narrow base we have been seeing lately.

In fact, 2025 is expected to have all 16 Zacks sectors enjoy earnings growth, with 8 of the 16 Zacks sectors expected to produce double-digit earnings growth. Unlike the last two years, when the Mag 7 group drove all or most of the aggregate earnings growth, we will have double-digit S&P 500 earnings growth in 2025, even without the contribution from this mega-cap group.