Q3 2024 Earnings Report: S&P 500 Shows 5.2% EPS Growth as Tech Leads the Way

Comprehensive Analysis of 3Q24 Earnings for Key S&P 500 Companies

Date: October 30, 2024

Broker: UBS Securities LLC

Introduction

The third quarter of 2024 has been a mixed bag for the S&P 500 index, with key companies reporting varied earnings results. This comprehensive analysis delves into the performance of major companies such as Exxon Mobil, Berkshire Hathaway, Merck & Co, Meta, Microsoft, Apple, and Amazon, among others. We will explore revenue growth, EPS growth, buybacks, and the market’s response to earnings surprises.

Overall Market Performance

As of October 30, 2024, 40.7% of the S&P 500’s market cap has reported their 3Q24 earnings. The overall expectations were for revenues to grow by 4.6% and EPS by 5.2%. Despite varied growth among different sectors, earnings have beaten estimates by 7.4% in aggregate, with 66% of companies topping projections. The firms that exceeded expectations on both revenues and EPS outperformed the market by 2.6%, compared to the historical average of 1.7%.

Sector-Specific Performance

Growth among sectors has shown significant variance:

TECH+: Expected EPS growth of 19.7%
Financials: Expected EPS growth of 7.7%
Non-Cyclicals: Expected EPS growth of 4.0%
Cyclicals ex-Energy: Expected EPS growth of -4.5%
Energy: Expected EPS growth of -28.0%

Analysis of Key Companies

Exxon Mobil

Exxon Mobil is set to report results in the upcoming week. The Energy sector is expected to be a significant drag on overall market performance with a projected EPS decline of 28.0%. Exxon Mobil, being a major player in this sector, is likely to reflect these broader trends.

Berkshire Hathaway

Berkshire Hathaway, a conglomerate with diverse holdings, is part of the Financials sector, which is expected to see a 7.7% growth in EPS. The company’s diversified portfolio may help it navigate the varied economic conditions better than more sector-focused firms.

Merck & Co

Merck & Co, a key player in the Health Care sector, is anticipated to contribute to the sector’s expected EPS growth of 6.1%. Health Care has shown resilience with a positive earnings surprise of 11.4%, the highest among all sectors.

Microsoft

Microsoft, part of the Big 6 TECH+ companies, is projected to see an EPS growth of 23.7%. The Big 6 TECH+ companies have been leading the market with robust performance, significantly outpacing the rest of the TECH+ sector.

Apple

Apple is another key player in the Big 6 TECH+ group, expected to report strong earnings. With the TECH+ sector’s anticipated growth and positive market response to earnings surprises, Apple is likely to continue its trend of strong financial performance.

Amazon

Amazon, classified under TECH+ and not Discretionary, is expected to contribute significantly to the TECH+ sector’s performance. Despite challenges in the broader Cyclicals sector, Amazon’s robust business model and market position should support its earnings growth.

Revenue and Earnings Dashboard

The 3Q24 earnings dashboard for the S&P 500 reveals the following weighted growth metrics:

Revenue Growth: 4.6%
Margins: -0.3%
Earnings Growth: 4.3%
Buybacks: 0.9%
EPS Growth: 5.2%

The TECH+ sector stands out with a revenue growth of 11.7% and an EPS growth of 19.7%. In contrast, the Energy sector faces a significant decline with a revenue growth of -5.7% and an EPS decline of -28.0%.

Surprise Dashboard

The surprise dashboard for 3Q24 shows that the S&P 500 companies have reported the following surprises:

Revenue Surprise: 1.5%
Margins Surprise: 5.9%
Earnings Surprise: 7.4%

The TECH+ sector again leads with a 9.2% earnings surprise, while the Energy sector, despite its challenges, has recorded a 6.1% earnings surprise.

Price Action

The market’s response to earnings surprises has been positive, with firms that beat both revenue and EPS expectations outperforming the market by 2.6%. Conversely, companies that missed on both fronts underperformed by -3.1%.

EPS Growth Analysis

The weighted and median EPS growth for the S&P 500 and its sectors are as follows:

S&P 500: 5.2% (weighted), 4.2% (median)
TECH+: 19.7% (weighted), 9.8% (median)
Cyclicals: -11.3% (weighted), 4.2% (median)
Energy: -28.0% (weighted), -21.4% (median)

EPS Revisions

The path of bottom-up S&P 500 consensus EPS has shown fluctuations, with historical trends indicating a decrease in estimates leading up to the quarter-end but a slight recovery post-reporting.

Reporting Calendar

Significant reporting activity is expected in the upcoming weeks, with key companies such as Microsoft, Apple, Exxon Mobil, Berkshire Hathaway, and Meta set to release their earnings.

Historical Trends

The historical trends for the S&P 500 reveal steady revenue and earnings growth, with notable spikes in certain quarters driven by exceptional performance in sectors like TECH+ and Health Care.

Conclusion

The 3Q24 earnings season has highlighted the resilience and challenges within the S&P 500 index. While the TECH+ sector continues to drive market performance with robust growth, sectors like Energy face significant headwinds. Investors should closely monitor upcoming earnings reports from key companies to gauge market sentiment and make informed investment decisions.