SP 500 Earnings: Still Seeing Upward Revisions for SP 500 Estimates

Oracle (ORCL), Lennar (LEN) and Adobe (ADBE) are the only names that will be of interest next week, in terms of companies reporting earnings. It was interesting with Thursday night’s State of the Union (SOTU) address, and the potential 5% new homebuyer tax credit, whether the prospect of that tax credit, will actually postpone new home purchases as new buyers await election results.

This blog will be out with an Oracle earnings preview this weekend. Oracle is still held in a few client accounts. This blog has followed the stock since the late 1990’s. Oracle typically doesn’t handle these big “mega-transitions” in the software space well. The cloud represented (or represents) both an opportunity and a threat to the database giant, and it’s been more of an obstacle. Oracle made a lot of noise around PAAS and SAAS and IASS and growth never really followed, earlier in the 2010 – 2019 decade. Does AI lessen this threat ? Probably not, but judgment will be reserved for now.

Overall SP 500 EPS and earnings estimate revisions still look healthy.

SP 500 data: 

  • The forward 4-quarter estimate (FFQE) rose from $243.23 the week prior to $243.29 this week, which doesn’t sound like much, but the typical trend is lower, hence the fact the FFQE is rising at all is a plus.
  • The PE ratio on the forward estimate is roughly 21x.
  • The SP 500 “earnings yield” fell 1 basis point this week, to 4.72% from last weeks 4.73%.
  •  The “upside surprise” for Q4 ’23 SP 500 EPS remains healthy at 6.3%, versus 7.2% in Q3 ’23.
  • SP 500 revenue also showing a little upside surprise, but at a much lower rate of +1.3% in Q4 ’23 vs +0.9% in Q3 ’23.

The key SP 500 EPS metric – if readers want one – is that as of January 5 ’24, the FFQE was $243.98, but as of today, March 8 ’24, the same FFQE is $243.23. That number is typically 3% – 5% lower by now, in normal quarter revisions activity, as forward EPS tends to slide, and then once actual earnings are reported, the typical “upside surprise” is 3% – 5%.

Ed Yardeni refers to this as the “fish-hook effect” since the revision activity resembles a “fish-hook” in it’s shape.

What’s gone more unnoticed is that 2023 SP 500 EPS actually finished very strong: here’s the table by sector from late October ’23 through March 8 ’24, which shows full-year 2023 SP 500 EPS rising from an expected +1.8%, to +4.1% today.

Naturally, the tech sector aided in the strong finish to 2023, as the technology’s sector’s expected 2023 growth rate more than doubled in the last 12 weeks.


Note how in the bordered area, in the last 4 weeks, the 4-week and 12-week rates of change have actually turned positive for SP 500 EPS.

Summary / conclusion: The overall action in the SP 500 EPS estimates as proxy for the benchmark look healthy, after Q4 ’23 EPS declines scared a lot of investors into thinking Q4 ’23 would be ugly, and they were anything but.

Here’s the expected SP 500 EPS growth rates for the next 3 years:

  • 2025: +13% now expected at $276.00
  • 2024: +10% now expected at $243.36
  • 2023: +2% now at $222.05

2023 will probably rise a little more into the last 3 weeks of the 4th quarter, 2023, earnings results, while 2025 will probably be revised lower over time.

The 2024 EPS estimate of $243.36 has remained stable since early January ’24. That’s a positive given all the guidance detail with Q4 ’23 earnings releases, i.e. there has been plenty of time for analysts to take down numbers based on 2024 guidance, and it hasn’t happened.

None of this is advice, or a recommendation. Past performance is no guarantee or suggestion of future results. Investing can involve loss of principal, even over short time periods. All SP 500 EPS data is sourced from LSEG. Please reach out to tajinder.dhillon@lseg.com for a trial of their earnings product. Readers should always evaluate their comfort with market and portfolio volatility and adjust accordingly.

Thanks for reading.

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