From most of the prominent Q1 ’25 earnings so far, which is just 59 companies per This Week in Earnings per LSEG, some of the mentioned trends in conference calls is that some SP 500 companies pre-ordered or accelerated orders for those products like impacted by tariffs. March ’25 retail sales data, which is a good read on the US consumer, still indicates a healthy trend with March retail sales +1.4%, or +1.7% after revisions.
What’s interesting to me is jobless claims which remain rock solid in the 220,000 area every Thursday morning, what with DOGE expecting to results in government layoffs and such. Waiting for a rise in jobless claims with all the headlines and turmoil, has been like Waiting for Godot.
In Jay Powell’s presentation last week to the Economic Club of Chicago, he mentioned the US labor markets remain in good shape.
The economic data has not been too bad, particularly inflation, but it’s all March ’25 data, and this is all “pre-Liberation Day” which was April 2nd.
Looking at Q1 and Q2 ’25 SP 500 EPS trends by sector:
Q1 ’25 earnings will see 114 companies report this week, so by Friday, April 25th about 40% will have reported their Q1 ’25 results.
Given earnings patterns over the years, and because Q1 ’25 was pre-Liberation Day, Q2 ’25 earnings are expected – from the results this past week – to be up 10% – 12% for the quarter.
That’s not bad.
Q4 ’24 EPS growth for the SP 500 was +17.1%, and revenue growth was +5%. Q1 ’25 SP 500 EPS growth is looking like it will be at least +10%, with revenue growth of +4.1% today, and that will likely get revised a little higher.
Here’s the issue: Q2 ’25 SP 500 EPs estimates have already started getting cut, and that reduction will likely continue for another 11 – 12 weeks. Q2 ’25 SP 500 EPS growth is expected at +8.2% today, that’s been reduced every week this year (see table below) and it could probably settle out at +4% – +5% by early July ’25.
Source: LSEG. (The dark bordered columns are trends in expected EPS and revenue growth rates for Q2 ’25 SP 500 earnings.)
If Q2 ’25 SP 500 EPS growth turns out to be 4% – 5% (and it could get cut further) it will be the worst quarter of y-o-y SP 500 EPS growth since Q2 ’23’s -2.3%.
The big pre-announcements last week were Nvidia’s $5.5 billion charge and AMD’s $800 million, and yet if you look above at the Q1 ’25 ands Q2 ’25 technology sector expected EPS growth rates, there has been little change after this week’s news. If semiconductors are leading the market in terms of relative strength it tends to be good for the SP 500 as a whole.
A better tell for semiconductors is to look at EPS and revenue estimate revisions over a period of time.
SP 500 data:
- The forward 4-quarter SP 500 EPs estimate fell this week to $275.24 from last week’s $277.32.
- The PE ratio on the forward estimate is now 19.2X versus the high of 22x between mid-Jan and mid-February ’25
- The SP 500 earnings yield is up to 5.21%, down from the spike two weeks ago of 5.50%
- Both high-yield and high-grade credit spreads tightened a little last week despite the decline in the Sp 500 on the week.
Summary / conclusion:
The SP 500 is still stuck in the trading range between the April 7th low of 4,835 and the open gap at 5,500.
As long as the benchmark hasn’t broken either of those levels, the market’s undecided on the depth and breadth of the tariff issue.
How far Q2 ’25 SP 500 EPS estimates get revised lower over the next 3 – 4 weeks will be critical. For all practical purposes, earnings season will unofficially end by mid-May ’25 for Q1 ’25.
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Thanks for reading.