We have regularly been flagging the steady improvement in the revisions trend since the start of Q2, which has become more entrenched in recent months. We have to look below the index level to appreciate the cross current in estimates at the sector levels.

The aggregate Q3 earnings estimate for the S&P 500 index has declined about -1% since the start of the period, with rising estimates for six sectors, including Tech, offsetting continued weakness of varying magnitudes in the remaining sectors.

Had it not been for the continued pressure on Energy sector estimates, the revisions trend for Q3 for the S&P 500 index would be modestly positive since the start of the period.

In addition to the Tech sector, Q3 estimates have moved higher for the Construction, Autos, Medical, Retail, and Industrials sectors.

For the Tech sector, you can see this favorable revisions trend in estimates for operators like Meta Platforms (META - Free Report), Alphabet (GOOGL - Free Report), Nvidia (NVDA - Free Report), and others.

The magnitude of positive revisions that Nvidia is experiencing is in a league of its own, as the chart below shows.

Image Source: Zacks Investment Research

But the gains in estimates at Alphabet, Meta, and others are as material and indicative of the overall improving earnings outlook.

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 long-feared recession doesn’t show up in this near-term earnings outlook. A big-picture view of corporate profitability on a long-term basis doesn’t leave much room for a recession either, as you can see in the chart below.

Image Source: Zacks Investment Research

Given the emerging consensus on the ‘soft-landing’ outlook for the economy, one can expect this favorable turn in the overall earnings picture to strengthen further as companies report Q3 results and share trends in underlying business.

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Handicapping Q3 Earnings: What To Expect
A Positive Earnings Revisions Trend Emerges
Breaking Down The Construction & Housing Earnings Picture