Quick Bites | US Earnings Look Good

Most companies in the S&P 500 Index have reported earnings for Q1 2024 (466 out of 500), at the time of writing. Of these companies, 77% reported earnings above analyst expectations and 16% reported earnings below analyst expectations. In a typical quarter (since 1994), 67% of companies beat estimates and 20% miss estimates. Over the past four quarters, 79% of companies beat the estimates and 17% missed estimates. 

 

In aggregate, companies are reporting earnings that are 8.2% above estimates, which compares to a long-term (since 1994) average surprise factor of 4.2% and the average surprise factor over the prior four quarters of 7.0%. 

 

 

Source: EdgeandOdds 

 

Of these companies, 61% reported revenue above analyst expectations and 39% reported revenue below analyst expectations. In a typical quarter (since 2002), 62% of companies beat estimates and 38% miss estimates. Over the past four quarters, 65% of companies beat the estimates and 35% missed estimates. 

 

The estimated earnings growth rate for the S&P 500 for Q1, 2024 is 7.6%, and the estimated earnings growth rate for the S&P 500 for Q2, 2024 is 10.5%. Trailing earnings per share (EPS) are now $226.30, up 2.8% year on year (YoY). Forward EPS are now $252.93, up 12.6% YoY. 

 

Inflation is less of an issue. 

 

 

 

Source: Goldman Sachs 

 

Despite the better-than-expected US earnings, valuations look somewhat stretched. The trailing price-to-earnings (PE) on the S&P 500 is 22.9x, implying an earnings yield of 4.37%, against a 10-year Treasury yield of 4.44%.  

 

 

Source: Shaw and Partners 

 

Of course, much will depend on the actual growth in earnings achieved over the next year or two to justify elevated valuations. 

 

 

Source: Shaw and Partners