Investing.com -- S&P 500 earnings growth for Q3 2024 has once again been revised lower, now standing at just 3.2%, according to Strategas analysts.
The continued downward revision is becoming a growing concern for equities, as the market depends on earnings growth to push towards new all-time highs, said the firm.
"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," wrote the firm.
While it is typical for estimates to be lowered ahead of earnings season, Strategas warns that 3.2% could decline even further if major contributors disappoint.
"Growth estimates are walking a fine line," they noted. A closer look at sector performance is said to reveal broader weakness.
Technology, Communications, and Health Care are expected to carry most of the index's weight, while Energy is projected to be the largest drag, with a 21.9% decline.
The rest of the sectors are expected to post between -2% and 4% growth, suggesting that earnings growth may not be widespread this quarter.
However, Strategas says Technology continues to be a standout sector, even as its recent price appreciation has slowed.
The firm's analysts highlight that 25 companies in the sector have issued positive earnings pre-announcements, compared to 20 negative ones, making it one of only two sectors with EPS estimates higher than they were on July 1st.
"The biggest hurdle for investors now is justifying the valuations," the analysts remarked.
One potential risk factor for Tech is the softening of South Korean exports, which are closely tied to S&P 500 earnings. While not yet alarming, this could impact future growth, said Strategas.