DEEP DIVE: Expecting Record S&P 500 Earnings Ahead

Joe reports that the S&P 500 Q1 earnings reporting season is now 98% complete, with 490 companies having issued their results. The 10 companies left to report are: Lululemon Athletica, Bath & Body Works, Brown-Forman, Campbell Soup, J M Smucker, Dollar Tree, Kroger, Autodesk, Broadcom, and Hewlett Packard Enterprise Co. Whatever those 10 firms report shouldn’t significantly change the aggregate results of the 500 companies in the index once the analysts’ consensus estimates are replaced by their actual results. Let’s have a look at the latest Q1 results:

 (1/7) Growth rates. The S&P 500 companies’ collective earnings per share and revenues per share edged down during Q1 from their recent record highs during Q3-2023 and Q4-2023, respectively (Fig. 1 below). Their y/y growth rates were 4.5% and 6.7% (Fig. 2 below and Fig. 3 below).

 (2/7) Forward guidance. Despite Q1’s small decline in earnings per share from its record high at the end of last year, most company managements’ forward guidance provided on Q1 earnings conference calls has been positive. We can see that in the analysts’ consensus earnings-per-share estimates for 2024, 2025, and 2026 (Fig. 4 below). All three rose as the earnings reporting season progressed, with the latter two rising to new record highs.