UBS anticipates an 8.4% year-over-year increase in earnings per share (EPS) for the S&P 500 in Q4 2024.
While this growth appears slower than previous quarters, UBS expects the final results to trend closer to 12%, consistent with historical patterns of upward revisions. In Q3, a similar trend was observed, with EPS growth reaching 8.9%, significantly surpassing the initial estimate of 4%.
“Earnings estimates follow a predictable cycle: they start high, are revised lower before the reporting season, and are ultimately exceeded by actual results,” UBS strategists led by Jonathan Golub stated in a note.
Notably, Q4 estimates have remained flat over the past two months, bucking the usual downward trend. UBS attributes this resilience entirely to tech-related companies.
The technology sector continues to drive earnings growth, with TECH+ expected to achieve a 20.4% increase, compared to just 2.5% for non-tech sectors. Within the tech space, forecasts vary significantly. For example, Nvidia (NASDAQ: NVDA) is projected to lead with a 62% surge in earnings, followed by Amazon (NASDAQ: AMZN) at 52.6%, and Alphabet (NASDAQ: GOOGL) at 26.1%. In contrast, other tech giants like Microsoft (NASDAQ: MSFT) and Apple (NASDAQ: AAPL) are expected to see more modest growth of 6.9% and 11.6%, respectively.
TECH+ remains a key contributor to overall growth, accounting for seven of the top ten contributors and adding 5.2% to the S&P 500’s EPS increase as a group.
On the downside, the Energy sector continues to weigh on overall performance, with a projected 27.5% decline in EPS. This sector has struggled throughout 2024 due to ongoing challenges. Meanwhile, Financials are forecasted to deliver robust growth of 17.8%, driven by major investment banks like Bank of America Corp (NYSE: BAC), JPMorgan Chase (NYSE: JPM), and Morgan Stanley (NYSE: MS), benefiting from prior-period adjustments.
“Financials, on a median basis, are expected to be the fastest-growing group, outpacing TECH+ with 10.5% growth compared to 8.5%,” UBS noted.
Interestingly, Q4 earnings revisions have been less negative than usual, with strength concentrated in the tech sector. Early reporters—20 companies with off-cycle quarter ends—exceeded expectations by 4.3%, slightly below the long-term average of 4.8% but weaker than recent quarters.
