Image Source: Pixabay

• The picture emerging from the Q1 earnings season continues to be one of steady improvement and resilience, with the earnings growth pace modestly accelerating and estimates for the coming periods starting to increase. On the flip side, positive surprises are tracking below other recent periods, particularly on the revenues side.
• Total earnings for the 310 S&P 500 members that have reported Q1 results are up +5.0% from the same period last year on +4.5% higher revenues, with 78.1% beating EPS estimates and 59.4% beating revenue estimates.
• As was the case in the preceding two quarters, the Tech sector remains a key growth driver in 2024 Q1. Had it not been for the robust Tech sector earnings growth, total earnings for the rest of the index would be down -2.6% (instead of +4.8% as a whole).
• Looking at the calendar year picture, total S&P 500 earnings are expected to grow by +8.6% this year after last year’s modest decline. Excluding the hefty Tech sector contribution, whose 2024 earnings are expected to be up +16.0%, earnings for the rest of the index would be up only +5.9%.

We have consistently flagged signs of improvement in the overall revisions trend in recent weeks, with estimates starting to go modestly up. We are seeing this trend for the current period (2024 Q2) as well as for full-year 2024 estimates.

This new development has roughly coincided with the start of the Q1 earnings season. That said, a number of sectors, including Tech and Retail, had already been enjoying positive estimate revisions for quite some time. At present, half of the 16 Zacks sectors have higher aggregate earnings estimates relative to what was expected at the start of the year.

In recent weeks, we have highlighted the favorable revisions trend for the Energy sector in this space. This week, we will discuss the evolving earnings outlook for the ‘Magnificent 7’ stocks.

The chart below shows aggregate earnings totals for the group on an annual basis.

Image Source: Zacks Investment Research

Please note that the $438.1 billion the group is currently expected to earn in 2024 is up from $428.2 billion last week.

We all know that the revisions trend for Tesla (TSLA - Free Report) has been negative for a while now, while the same for Apple (AAPL - Free Report) is also negative, though the magnitude of negative revisions for Apple is far less severe.

The revisions trend for the remaining five members of this group is positive enough to more than offset the Tesla and Apple effects. Of these five, Nvidia (NVDA - Free Report) is in a league of its own, as the chart below shows.

Image Source: Zacks Investment Research

The chart below shows how the aggregate full-year earnings estimate for the sector has evolved over the past year.

Image Source: Zacks Investment Research

The chart below shows how S&P 500 aggregate earnings estimates for full-year 2024 have evolved.

Image Source: Zacks Investment Research

Below, we show the overall earnings picture for the S&P 500 index on an annual basis.

Image Source: Zacks Investment Research

A big part of this year’s earnings growth is expected to come from margins reversing last year’s declines and starting to expand again. The expectation is that aggregate net margins this year get back to the 2022 level, with the Tech sector driving most of the gains.

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