S&P 500 Earnings: Still Seeing Upward Revisions for EPS Estimates

 | Mar 11, 2024 03:06AM ET

Oracle (NYSE:ORCL), Lennar (NYSE:LEN) and Adobe (NASDAQ: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 S&P 500 EPS and earnings estimate revisions still look healthy.

h2 S&P 500 Data: /h2
  • 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 S&P 500 “earnings yield” fell 1 basis point this week, to 4.72% from last weeks 4.73%.
  •  The “upside surprise” for Q4 ’23 S&P 500 EPS remains healthy at 6.3%, versus 7.2% in Q3 ’23.
  • S&P 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 S&P 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 S&P 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 S&P 500 EPS rising from an expected +1.8%, to +4.1% today.