Just a quick comment on Friday, January 3rd, ’25’s market action: semi’s actually saw some good volume, with Nvidia (NASDAQ:NVDA) ending the final day of the holiday break, with slightly better-than-average volume, and the VanEck Semiconductor ETF (NASDAQ:SMH) almost reaching average daily volume.
JPMorgan (NYSE:JPM) was actually up +1.37% on Friday, also on heavier-than-average volume.
Didn’t expect the volume upside on the last trading day, before the real new year starts January 6th, 2025.
Quarterly Bump:
- The forward four-quarter estimate (FFQE) saw the quarterly bump on January 3 ’25, with the forward estimate rising to $272.67 from last week’s $263.39, for a quarterly bump of $9.37. Effectively, the FFQE until April 1 ’25, becomes the calendar ’25 EPS expectation.
- The PE on the FFQE slipped to 21.8x versus last weeks 22.7x.
- The S&P 500 earnings yield jumped to 4.59% from last weeks 4.41%, still too low in my opinion.
Here’s what’s interesting: the 4th quarter of ’24 earnings start in the next 10 days, and the expected S&P 500 EPS growth is +9.6% as of today.
Here’s the chronology:
Note how Q3 ’24 S&P 500’s expected EPS growth rate (first column) bottomed at +4% and ultimately rose to +9.1% as of today’s date.
Q4 ’24 S&P 500 EPS growth is starting at +9.6% as of today, will likely slip a little over the next few weeks and then work higher after mid-January ’25 and beyond.
Year-over-year S&P 500 revenue growth in Q3 ’24 hit +5.5%, which was the strongest quarter of S&P 500 revenue growth since Q1 ’23’s +5.8%, and that was still the Covid-driven stimulus having a material effect on the numbers.
Q4 ’24 S&P 500 EPS and revenue growth – as it stands today – is looking at +9.6% EPS growth and +4.1% revenue growth.
Those are still very healthy numbers.
For the 29 quarters from Q4, 2012, through Q4 ’19, the S&P 500 revenue growth averaged +3.2%, and then unfortunately COVID and the pandemic just threw all the numbers completely out-of-whack.
What does 2025 look like by sector?
Note how 2024 changed in terms of “expected” sector EPS growth within the S&P 500.
I’ve talked about this aspect of “earnings watching” over the years, but I don’t expect it’s resonated with too many people, since it’s pretty nuanced, but the one “tell” to look for when watching S&P 500 earnings data week-to-week, is don’t worry too much about slightly lower EPS revisions week-to-week, meaning don’t sell based on a slide in EPS estimates (unless the negative revisions are quite large), But estimates that remain flat over a period of time, or (even better) move slightly higher, are sectors that warrant your attention, in terms of owning the sector.
Put another way, the sectors that show upside bias in EPS revisions over time, seem to have a greater probability of trading higher, than sectors which show a gradual negative revision bias over time, trade lower. I tend to chalk this up to the general caution on the part of sell-side analysts and the desire to not be caught with a sharply lower stock after earnings, than a sharply higher stock after earnings.
The two sectors that are showing positive revisions in the 2025 expected EPS growth box are the financial and industrial sectors above that are bordered in black.
The industrial revisions surprised me, and the fact is that the positive revisions started with Q3 ’24 earnings.
Let’s see what Q4 ’24 earnings do to the expected 2025 EPS growth estimates.
Remember too these are full-year, calendar-year, sector EPS estimates that are updated every week, not quarterly.
The positive revisions to industrial earnings started with Q3 ’24 earnings, prior to the election results.
Conclusion:
S&P 500 earnings can give clues to investors on what’s ahead but you have to pay attention. Stable to positive revisions can be bigger tells for investors than the slightly downward revision drift that investors typically see over time. (Ed Yardeni calls this the “fish-hook effect”.)
Q4 ’24 earnings are starting with an expected strong growth rate of +9.6%, which should drift down a little over the next two weeks.
This blog will have more to come on individual sectors over the next 10 days.
Disclaimer: None of this is advice or a recommendation, but only an opinion. Past performance is no guarantee of future results. Investing can and does involve the loss of principal even for short periods of time. LSEG is the primary source of the above S&P 500 earnings and revenue info. None of this information may be updated and if it is updated, may not be updated in a timely fashion.
Thanks for reading.