SP 500 (and Russell 2000) Earnings Look: It’s a Quieter Period Between Now and Quarter End

To give a little voice to the Russell 2000’s earnings, this blog is going to start including some short commentary each week on the small-cap benchmark, just so this blog can learn and understand more about the asset class.

The Russell 2000 is different than the SP 500 in that – even though both indices have the same 11 sectors by market cap within the R2k – industrials is the biggest sector by market cap, while by number of companies, healthcare and financials are the two largest sectors, while for the SP 500 it’s industrials and technology with the most individual companies.

Here’s the one table posted for readers that might shed some light on Russell 2000 earnings, particularly looking forward.

Note the Russell 2000 EPS growth rate, “ex-Energy”. It looks like the first quarter of ’24 will be the nadir in terms of yoy earnings declines, excluding energy.

This table is taken directly from London Stock Exchange’s (LSEG) weekly missive.

This blog’s goal is to delve more into R2k earnings and revenue history and see what can be learned and what might be valuable to readers.

SP 500 data: 

  • The forward 4-quarter estimate this week rose to $253.42 from last week’s $253.27, and up from 3/31/24’s $242.94;
  • The PE on this weeks forward estimate is 21.4x, versus last weeks 21.1x and 3/31/24’s 21.6x. (That means – since 3/31/24 – we’ve seen a little PE compression even with the strong stock market rally this year. Since early Jan ’24, investors have seen a little PE expansion, which implies that the upward revisions to forward estimates have been greater with the first quarter ’24 earnings reports (the last 10 weeks), than with the Q4 ’23 earnings reports.)
  • The SP 500 earnings yield was 4.67% at this weeks close, vs 4.73% last week, and 4.62% as of 3/31/24.
  • The upside EPS surprise this quarter was 8%, (with two weeks left in the quarter), the highest of the last 8 quarters, per the LSEG data.

One more table:

This is a table this blog started tracking weekly to watch expected growth rates and what caught my eye this week – and this period towards the end of every quarter usually sees lower revisions as analysts get cautious – was that the “expected” 2025 EPS growth rates for the first three quarters saw higher revisions.

Looking back at the data since January 1, the trends are pretty clear.

Summary / conclusion: Readers have been seeing and hearing many of the big sell-side firms and financial institutions ratchet up their numbers for expected 2024 EPS for the SP 500, and for good reason.

While writing this blog on Saturday morning, and watching Bloomberg at the same time, one of the headlines was Goldman Sachs raised their expectations for the SP 500 in 2024, thanks to the “profit outlook”.

There is little question that Q1 ’24 SP 500 EPS (and revenue, to some extent) has sell-side analysts lifting numbers.

But regular readers have been seeing that here for a while now.

Remember, everything changes in the markets. Trends don’t last forever. Last week, this blog turned a little more cautious on the market. The issue is the late 1990’s patterns are starting to repeat.

SP 500 earnings could remain fine as the PE compresses, usually from some unanticipated shock. That’s not a prediction, but given the state of the market, it’s susceptible to that right now.

At this time of the quarter, there are fewer earnings reports, and more vacations. It will likely be a slower period for earnings updates, number changes and earnings releases over the next two – three weeks.

More to come over the weekend.

None of this is advice or a recommendation, but simply an opinion. Past performance is no guarantee of future results. Investing can and does involve the loss of principal even for short periods of time. All EPS and revenue data above sourced from LSEG. (Reach out to Tajinder.Dhillion@lseg.com to get a trial to the SP 500 and Russell 2000 earnings reports.)

Thanks for reading.


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