US stock market: Q4 earnings season preview
investing
UBS forecasts the S&P 500 to see an 8.4% year-over-year increase in earnings per share (EPS) for the fourth quarter of 2024 , News.az reports citing Investhing.
Despite appearing slower than the growth seen in previous quarters, UBS expects final figures to align closer to 12%, supported by historical trends of upward revisions. A comparable pattern was observed in Q3, where EPS growth ended at 8.9%, far exceeding the initial 4% estimate.
“Earnings estimates follow a predictable pattern: they start too high, are adjusted lower heading into reporting season, and are topped by actual results,” UBS strategists led by Jonathan Golub said in a note.
“Over the past 2 months, 4Q estimates have remained flat, defying the normal downward trend. However, this recent strength is entirely attributable to tech-related companies,” they added.
The technology sector continues to dominate earnings growth, with TECH+ expected to rise 20.4%, compared to just 2.5% for non-tech sectors.
However, consensus EPS growth forecasts for tech companies are varied, UBS points out. For instance, Nvidia (NASDAQ:NVDA) is projected to see its earnings surge by 62%, followed by Amazon (NASDAQ:AMZN) at 52.6%, and Alphabet (NASDAQ:GOOGL) at 26.1%.
At the same time, other tech giants, such as Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL), are forecasted to deliver more moderate growth of 6.9% and 11.6%, respectively.
TECH+ plays a dominant role in driving Q4 growth, accounting for seven of the top ten contributors and adding 5.2% to the overall S&P 500 EPS increase as a group.
On the other hand, Energy remains a drag on overall performance, with EPS expected to contract by 27.5%. This sector has consistently weighed on earnings throughout 2024 due to ongoing challenges.
Meanwhile, financials are set to deliver robust growth of 17.8%, largely attributed to the largest investment banks, such as Bank of America Corp (NYSE:BAC), JPMorgan Chase (NYSE:JPM), and Morgan Stanley (NYSE:MS), which benefit from prior-period charges.
“On a median basis, Financials are expected to be the fastest growing group, outpacing TECH+ (10.5% vs. 8.5%),” UBS highlights.
Interestingly, revisions to Q4 earnings estimates have been less negative than usual, with strength concentrated in tech-related companies. Over the past two months, estimates have remained flat, defying the typical downward adjustments seen ahead of reporting season.
UBS points out that early reporters—20 companies with off-cycle quarter ends—have exceeded expectations by 4.3%, slightly below the long-term average of 4.8%, though somewhat weaker than in recent quarters.
Despite appearing slower than the growth seen in previous quarters, UBS expects final figures to align closer to 12%, supported by historical trends of upward revisions. A comparable pattern was observed in Q3, where EPS growth ended at 8.9%, far exceeding the initial 4% estimate.
“Earnings estimates follow a predictable pattern: they start too high, are adjusted lower heading into reporting season, and are topped by actual results,” UBS strategists led by Jonathan Golub said in a note.
“Over the past 2 months, 4Q estimates have remained flat, defying the normal downward trend. However, this recent strength is entirely attributable to tech-related companies,” they added.
The technology sector continues to dominate earnings growth, with TECH+ expected to rise 20.4%, compared to just 2.5% for non-tech sectors.
However, consensus EPS growth forecasts for tech companies are varied, UBS points out. For instance, Nvidia (NASDAQ:NVDA) is projected to see its earnings surge by 62%, followed by Amazon (NASDAQ:AMZN) at 52.6%, and Alphabet (NASDAQ:GOOGL) at 26.1%.
At the same time, other tech giants, such as Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL), are forecasted to deliver more moderate growth of 6.9% and 11.6%, respectively.
TECH+ plays a dominant role in driving Q4 growth, accounting for seven of the top ten contributors and adding 5.2% to the overall S&P 500 EPS increase as a group.
On the other hand, Energy remains a drag on overall performance, with EPS expected to contract by 27.5%. This sector has consistently weighed on earnings throughout 2024 due to ongoing challenges.
Meanwhile, financials are set to deliver robust growth of 17.8%, largely attributed to the largest investment banks, such as Bank of America Corp (NYSE:BAC), JPMorgan Chase (NYSE:JPM), and Morgan Stanley (NYSE:MS), which benefit from prior-period charges.
“On a median basis, Financials are expected to be the fastest growing group, outpacing TECH+ (10.5% vs. 8.5%),” UBS highlights.
Interestingly, revisions to Q4 earnings estimates have been less negative than usual, with strength concentrated in tech-related companies. Over the past two months, estimates have remained flat, defying the typical downward adjustments seen ahead of reporting season.
UBS points out that early reporters—20 companies with off-cycle quarter ends—have exceeded expectations by 4.3%, slightly below the long-term average of 4.8%, though somewhat weaker than in recent quarters.
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