According to LSEG, only 29 companies have announced their financial results for the first quarter of 2024 so far, and the major banks that announced their financial results on the morning of Friday, April 12th have announced their financial results on Monday, April 15th or April 16th. It won't be counted until Tuesday. An additional 41 companies are expected to report this week.
Importantly, the “expected” 2Q24 EPS growth rate has declined to +2.7% as of Friday, April 12, 2024 (up from last Friday, 4/24). (down from +5% as of May 5th). Some people are concerned, but the pattern is very typical.
Expected YoY growth in S&P 500 EPS for the fourth quarter of 2023 peaked at +10.9% on September 22, 2023, but has since increased to +10.9% as of January 12, 2024. Actual S&P 500 EPS growth ended at +10.1, although it fell to 4.4%. 24% or double the expected growth rate by late March 2020.
“Expected” quarterly growth rates follow the typical pattern shown above. Ed Yardeni has long referred to this as the “fishhook effect.” Once actual quarterly reporting begins (as Q1 2024 has begun), quarterly growth rates will begin to rise after 3 to 6 months, and quarterly S&P 500 growth rates (typically the busiest week before) bottoms out and then either stabilizes or rises. Typically, the expected growth rate for that quarter is 3% to 5% higher.
In other words, the final S&P 500 EPS growth rate for Q1 2024 is likely to end up being between 5% and 7%. However, as I wrote in this blog, the “upside surprise” element is important.
Here are some that may be of interest:
Keep an eye out to see how the projected sector EPS growth for the full year 2024 changes once the Q1 2024 earnings report is released.
Notice in the table above that the “expected” Healthcare segment revenue is significantly lower (highlighted). This could be a bad forecast, or it could be the first sign of an even tougher year for the healthcare industry. 2023 was a tough year for the healthcare industry, with profits of just 2% despite the impact of weight loss drugs. JNJ, Abbott Labs (NYSE:), and Intuitive Surgical (NASDAQ:) are the healthcare companies reporting this week.
Speaking of Johnson & Johnson (NYSE:), this blog's techie Gary Morrow (@GarySMorrow on X) informed me this week that JNJ will soon test its 23-year low near $144. He gave it to me. (Morrow does great technical work; follow him on Twitter).
This performance chart shows that while JNJ has underperformed the S&P 500 for the past 13 years, it has slightly outperformed the S&P 500 (i.e., by a few basis points) since January 1, 2000.
JNJ may be suffering from what is called “complex inflammation.” The company, which survived the horrors of the Tylenol murders in the early 1980s (making it a Harvard case study in crisis management), has declined significantly over the past decade. While JNJ's consumer business has been lagging behind for years, these segments have reversed as medical devices and diagnostics businesses have grown (pharmaceuticals have also lagged), MDD has slowed and consumer brands have begun to recover. However, this blog stopped following his JNJ in 2018. We don't know the financials and revenue estimates yet, but we haven't been able to keep up with the story.
Please take this for what it's worth. But I'm surprised this healthcare giant hasn't been broken up. (He is still long on one of his JNJ positions in his one account purchased in 2012.)
In the spreadsheet above, the growth forecast for the financial sector has improved since December 31st, but the expected growth for the industrial sector appears to have been halved, from +12% to +6%.
Goldman Sachs (GS) and Schwab (SCHW) are scheduled to report on Monday, April 15, 2024, but another earnings report this blog will focus on will be Netflix (NASDAQ:).
S&P 500 data:
- The outlook for the fourth quarter has risen again to $251.81 from $251.58 last week, but the only unusual thing is that the pattern is typically more downward than upward.
- This week's P/E ratio decreased from 20.6 times the previous week to 20.3 times.
- The S&P 500's earnings yield rose again to 4.91%, marking the second consecutive year of increases.
- Few companies have reported earnings for Q1 2024, so upside surprises are not material yet. Last week he had EPS +20% and this week +13%, but take that with a grain of salt.
This one chart from Bespoke shows a range that is keeping pace with the market rally (always positive), but the 10-day up/down is currently very oversold.
Conclusion:
S&P 500 earnings won't be very interesting until the week of April 22nd, but there are some interesting reports this week. Usually the financial industry is the first to report, and this time it is no different, with more than 50% of the financial sector having reported by the end of this week.
Another earnings post will be published tomorrow.
In fact, there's no reason not to expect another decent earnings season, especially considering the US economy and inflation.
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This is not advice or recommendation. Past performance does not guarantee or indicate future results. Investments involve the possibility of loss of principal, even over a short period of time. Market volatility can change rapidly. All S&P 500 EPS and earnings data comes from LSEG.
thank you for reading.
