Q4 Earnings Season Preview: Tech and Financials Set to Drive Growth
![]() |
Tech sector leads, financials show strong performance in Q4 earnings season. |
Q4 Earnings Season Preview: What to Expect from the US Stock Market
As the US stock market approaches the fourth-quarter earnings season for 2024, analysts and investors are keeping a close eye on the performance of key sectors. The outlook points to continued dominance from the tech sector, with strong contributions from major companies like Nvidia, Amazon, and Alphabet. At the same time, financials are expected to show solid growth, while the energy sector remains a weak spot.
In this article, we will break down what investors can expect in the upcoming earnings season, focusing on the major sectors, key companies, and potential market-moving factors. Let’s dive into the details of what’s ahead for the Q4 earnings season and how various sectors will shape the market's performance.
S&P 500 Earnings: The Overview
UBS forecasts an 8.4% year-over-year growth in earnings per share (EPS) for the S&P 500 in Q4 2024. While this growth rate is lower than what we saw earlier in the year, the final numbers are expected to be closer to 12%, thanks to historical upward revisions. This pattern has been evident in previous quarters, such as Q3, where EPS growth ended up at 8.9%, well above the initial estimate of 4%.
Historically, earnings estimates for the S&P 500 start out too high, only to be revised downward ahead of reporting season. However, actual results tend to exceed those lower estimates, giving investors optimism as earnings season unfolds.
Tech Sector: The Key Growth Driver
The technology sector continues to be the main driver of earnings growth, with UBS forecasting a 20.4% increase in EPS for the tech-heavy TECH+ group. In comparison, non-tech sectors are expected to see a modest 2.5% growth. The dominant tech companies such as Nvidia, Amazon, and Alphabet are expected to contribute the most to this growth.
Nvidia: A Leading Performer
Nvidia (NASDAQ: NVDA) is forecasted to see a 62% increase in earnings, largely driven by its strong position in the graphics card market and growing demand for AI-related products. The company has been at the forefront of the AI revolution, with its products playing a crucial role in powering AI systems, making it one of the top contributors to tech sector growth.
Amazon: Continued Expansion
Amazon (NASDAQ: AMZN) is projected to report a 52.6% rise in EPS. The company continues to dominate the e-commerce space, while its cloud division, Amazon Web Services (AWS), remains a major growth driver. AWS continues to see high demand, particularly in the fields of cloud computing and artificial intelligence, boosting overall company earnings.
Alphabet: Strong Growth from Advertising
Alphabet (NASDAQ: GOOGL) is expected to see a 26.1% increase in EPS. The company’s dominant position in digital advertising, combined with its expanding cloud and AI ventures, positions it well for continued earnings growth. Alphabet's diverse revenue streams provide stability even in times of economic uncertainty, making it a strong performer in the Q4 earnings season.
Tech’s Dominance: Contributing to Overall S&P 500 Growth
Tech companies will play a crucial role in driving the overall growth of the S&P 500 in Q4. According to UBS, the TECH+ group is expected to account for seven of the top ten contributors to EPS growth, adding 5.2% to the overall S&P 500 earnings increase. The dominance of this sector highlights the continued strength of tech, even as other sectors face challenges.
Financials: A Robust Performance
While tech leads the way, the financial sector is also expected to show strong growth. The earnings for financials are projected to rise by 17.8%, driven largely by the biggest investment banks, such as Bank of America (NYSE: BAC), JPMorgan Chase (NYSE: JPM), and Morgan Stanley (NYSE: MS). These banks have benefited from prior-period charges and strong earnings from their trading desks.
Interestingly, financials are expected to be the fastest-growing sector on a median basis, with an anticipated growth rate of 10.5%, surpassing even the tech sector, which is expected to see growth of 8.5%. This performance underscores the continued strength of the financial sector, especially among the largest institutions.
Energy Sector: Struggling to Keep Up
The energy sector, however, is expected to continue its underperformance in Q4. The sector is forecasted to see a 27.5% decline in EPS, which has been a recurring trend throughout 2024. Energy companies are facing numerous challenges, including fluctuating oil prices and the ongoing global economic uncertainties, which are limiting their ability to drive significant earnings growth.
Despite these challenges, the energy sector remains an important part of the US economy. However, its poor performance in Q4 will likely weigh on overall market growth.
Early Earnings Reports: Beating Expectations
The early reporters, 20 companies with off-cycle quarter ends, have shown a 4.3% earnings beat compared to expectations. This is slightly below the long-term average of 4.8%, but still a strong performance. The early success of tech companies highlights their strength and suggests that the broader market will likely see strong results as the earnings season progresses.
What to Expect Moving Forward
As we enter the Q4 earnings season, the outlook remains positive for tech and financials. While the energy sector faces headwinds, tech giants like Nvidia, Amazon, and Alphabet are expected to lead the charge, with robust growth projected for their earnings. Financials are also set to show strong results, particularly from the major banks, which are benefiting from strong trading and investment activities.
The continued strength of the tech sector suggests that we could see a more favorable earnings season than initially expected. However, investors will also need to monitor developments in the energy and other sectors to gauge the broader health of the market.
Key Takeaways from Q4 Earnings Season
- Tech Sector Dominance: Nvidia, Amazon, and Alphabet are expected to drive most of the earnings growth in Q4, with significant year-over-year increases in EPS.
- Strong Financials: Investment banks like JPMorgan and Bank of America are poised to report solid growth, especially due to strong performance in trading.
- Energy Struggles: The energy sector continues to underperform, with a projected decline in earnings, continuing a trend from earlier in 2024.
Summary:
The Q4 earnings season is expected to showcase significant growth, particularly driven by the tech sector. Nvidia, Amazon, and Alphabet are poised to report impressive earnings, while financials also show strong performance. However, the energy sector will likely continue to face challenges, limiting its contribution to market growth.
Q&A from Search Engines:
-
What is the expected EPS growth for the S&P 500 in Q4 2024?
UBS forecasts an 8.4% year-over-year growth for the S&P 500 in Q4 2024, with final results expected to exceed 12%. -
Which sectors are expected to lead earnings growth in Q4 2024?
The tech sector is expected to dominate earnings growth, with companies like Nvidia, Amazon, and Alphabet driving a 20.4% increase in EPS for tech. -
Why is the energy sector underperforming in Q4 2024?
The energy sector faces challenges like fluctuating oil prices and global economic uncertainties, leading to a projected 27.5% decline in EPS. -
Which companies are expected to report the strongest earnings in Q4 2024?
Nvidia, Amazon, and Alphabet are expected to report strong earnings in Q4 2024, with increases in EPS of 62%, 52.6%, and 26.1%, respectively.
댓글
댓글 쓰기