S&P 500 Earnings Growth Revised Lower for Q3 2024

Investing.com reports that S&P 500 earnings growth for Q3 2024 has been revised lower to 3.2%, according to Strategas analysts.

This downward revision raises concerns for equities as the market relies on earnings growth to reach new all-time highs. Strategas pointed out, “While it’s not unusual to see downward revisions heading into a reporting season, it’s becoming a bigger concern for equities considering the need for growth in order for the market to continue to make new all-time highs.”

Although it is standard for estimates to decline before earnings season, Strategas warns that the 3.2% figure may fall further if key contributors underperform. “Growth estimates are walking a fine line,” they observed, emphasizing a closer look at sector performance reveals broader weakness.

Technology, Communications, and Health Care sectors are expected to support the index, while Energy is predicted to drag with a 21.9% decline. Other sectors are forecasted to show earnings growth between -2% and 4%, indicating that this quarter’s earnings growth may not be widespread.

Despite the slowdown in recent price appreciation, Strategas notes Technology remains a strong sector, with 25 companies issuing positive earnings pre-announcements, compared to 20 negative ones—one of only two sectors with EPS estimates higher than on July 1.

The analysts also commented, “The biggest hurdle for investors now is justifying the valuations.” A softening of South Korean exports, which are linked to S&P 500 earnings, could pose a risk to future growth, although it is not yet alarming, they cautioned.