Image Source: Pexels

With results from 88% of S&P 500 members already out, we can confidently say that the overall earnings picture remains stable and largely positive. Earnings growth for the S&P 500 index, which was negative for each of the preceding three quarters, is on track to turn positive in Q3, with the growth pace expected to steadily improve in the coming periods.

One major sector whose results really stood out this earnings season has been the Tech sector, with Q3 earnings for the sector on track to increase +20.8% from the same period last year on +4.2% higher revenues. The sector has had a profitability problem since the start of 2022, but it appears on track to resume its traditional growth attributes going forward, with double-digit earnings growth expected in each of the coming three periods.

For the current period (2023 Q4), the expectation is for S&P 500 earnings to increase by +1% from the same period last year on +2.5% higher revenues.

The chart below shows how estimates for 2023 Q4 have evolved since the quarter got underway.

Image Source: Zacks Investment Research

This is a bigger decline in quarterly estimates compared to what we had seen in the comparable periods to either of the preceding two quarters. This is a reversal of the favorable revisions trend that we have been spotlighting 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 12 of the 16 Zacks getting cut since the start of October. The biggest cuts to estimates have been for the Autos, Medical, Consumer Discretionary, Transportation, and Basic Materials sectors.

For example, take a look at estimates for Pfizer (PFE - Free Report) and Eli Lilly (LLY - Free Report) of the Medical sector and General Motors (GM - Free Report) and Tesla (TSLA - Free Report) of the Autos sector.

Eli Lilly is currently expected to earn $2.94 per share in 2023 Q4, which has been cut from $3.12 per share a month back and $3.14 per share two months back. Pfizer has suffered a far more severe cut to estimates, with the current -$0.13 loss down from positive earnings of $0.83 per share a month ago.

Q4 earnings estimates for General Motors and Tesla have similarly come down lately.

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 May 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 long-feared recession doesn’t show up in this near-term earnings outlook.

We show below the overall earnings picture for the S&P 500 index on an annual basis.

Image Source: Zacks Investment Research

This big-picture view of corporate profitability doesn’t leave much room for that development either, as shown in the chart above.

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