S&P 500: There Is Absolutely Nothing Wrong With Earnings

Nvidia's (NASDAQ:NVDA) earnings weight is 3.2% within the S&P 500, while it’s market cap weight as of Thursday night’s, May 23rd ’24 close, was 5.8%.

That earnings weight will likely close quickly over the next 12 – 18 months.

This week, the S&P 500 closed at 5,304.72, while the close last week was 5,303.27.

S&P 500 Data:

• The forward 4-quarter estimate for the S&P 500 dropped a little this week to $252.61 from last week’s $252.93 but is up nicely from early January’s $243.98;
• The PE ratio this week is 21x vs 21x last week and 21x as of early Jan ’24. (That tells us there is little PE expansion to this years stock market rally – it’s all earnings growth driven);
• The S&P 500 earnings yield is 4.76% this week, down from 4.77% last week, and 5.19% in early January; (I’d still like to see it over 5%.)
• The Q1 ’24 bottom-up S&P 500 EPS estimate is $56.62 this week, vs the estimate of $54.92, or 3% higher since the last weekend in March.

How Are Sector Growth Rates Looking for Q2 ’24?

Consumer discretionary (Amazon (NASDAQ:AMZN), Tesla (NASDAQ:TSLA)), Communication services (META (NASDAQ:META) and Alphabet (NASDAQ:GOOGL)) and Technology (Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Nvidia, etc.) are leading the S&P 500 which should come as absolutely no surprise.

Remember, when looking at a table like the above, you want to watch for the sectors that have seen positive revisions to the expected growth rates. The typical pattern is to see negative revisions or falling expected growth rates as the quarter approaches.

Frankly, to be straightforward about it, Q2 ’24 looks pretty solid 6 weeks from the beginning of the quarter.

Conclusion:

With Q1 ’24’s earnings season for the S&P 500 now over, there is absolutely nothing wrong with the S&P 500 earnings, and that’s been the case for a while, despite voices to the contrary. The Q1 ’24 expected EPS growth rate bottomed at +2.7% on April 12th, and now is expected to finish at +8% as of today.

Last quarter, S&P 500 EPS grew 10% yoy. The only companies we’ll be watching next week in terms of earnings reports are Foot Locker (NYSE:FL) on Thursday morning, May 30th, and Costco (NASDAQ:COST) on Thursday evening. Foot Locker's commentary could impact Nike (NYSE:NKE), and Costco is just a phenomenal business sold too soon.

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More articles are planned for over the weekend. Wanted to push this out on a Friday afternoon, of a long, holiday weekend.

None of this is advice or a recommendation. Past performance is no guarantee of future results. Investing can involve loss of principal, even for short periods of time.

Thanks for reading.

Written By: Brian Gilmartin