Earnings season off to a strong start

Review the latest Weekly Headings by CIO Larry Adam.

Key Takeaways

• The S&P 500’s 4Q24 earnings season has been scoring touchdowns
• The tech sector got blitzed by competition from China AI
• Despite weakness, mega-cap tech earnings are not offsides

Ready for the Big Game? This weekend will mark one of the most-watched television events of the year, with upward of 200 million people tuning in to see if Kansas City can make history with an unprecedented three-peat! With excitement building, the National Retail Federation expects Americans to spend a record $18.6 billion—a 7.5% increase from last year. Another area seeing a big surge is the cost of commercials, which have set a new record at up to $8 million for just a 30-second spot. This year, AI-themed ads are expected to be all the buzz. Speaking of AI, the Tech sector has been in the spotlight recently, with concerns about new entrants raising questions about the outlook for this highly-valued sector and sending some jitters through the market. Below, we provide an update on the 4Q24 earnings season and explain why our positive outlook on tech- related companies remains unchanged. 

• 4Q24 Earnings Season Has Been Scoring ‘Touchdowns’ | The 4Q24 earnings season is off to a strong start. So far, over 75% of the S&P 500’s market cap has reported, with earnings on track to rise 14% year-over-year. This marks the sixth consecutive quarter of positive EPS growth and the best quarter of growth in three years. To date, 78% of companies are beating estimates, which is above the 5-year average, and in aggregate, they have exceeded estimates by ~7%. One of the most notable stories this earnings season is the broadening of earnings beyond mega-cap tech. In fact, S&P 500 earnings excluding mega-cap tech are up 10% year-over-year—the best pace of growth since 1Q22.
• Tech Sector Got ‘Blitzed’ By China AI | Broadening earnings have boosted market performance, with 10 out of 11 sectors delivering positive returns year-to-date. 

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