Optimism in Wall Street for S&P 500 Earnings Growth: Analysts are rapidly increasing earnings forecasts for this quarter,
marking the fastest rate of adjustment in two years and suggesting that the worst period of profit downturns for Corporate America might be over.

Content

Positive Results

Resilience of the American Economy

American Stock Index

Signs of Economic Weakness

Analysts Expectations

Earnings Announcements

Positive Results

Nearly 90% of companies in the S&P 500 Index have reported their results this season,
and positive outcomes from the first quarter have led Wall Street to enhance profit projections
for the upcoming three months through June, according to Bloomberg Intelligence data.

Resilience of the American Economy

The American economy’s resilience and strong consumer demand are expected to sustain earnings growth
for the third consecutive quarter after a period of three-quarters of profit decline.
Bloomberg Intelligence reports that the energy and materials sectors, closely tied to the economic cycle, are leading these profit upgrades.

A senior analyst at Bloomberg Intelligence, Wendy Soong, commented,
“This is a promising indicator for the trajectory of US stocks this year as it shows that
more analysts are upgrading their company estimates after realizing previous predictions were overly pessimistic,
which aids in supporting operating margins.”

American Stock Index

The primary index for American stocks is anticipated to achieve a 7.1% earnings growth
for the January to March quarter, surpassing the pre-season estimates of 3.8%.

A key metric, earnings-revision momentum—which tracks changes in expected earnings per share over the next twelve months
—has hit its highest mark since September,
indicating potential further upward adjustments in analysts’ forecasts in the near future.

This outlook is encouraging for a market nearing record highs,
even as the Federal Reserve plans to maintain higher interest rates for an extended period.

Signs of Economic Weakness

Thomas Martin, a senior portfolio manager at Globalt Investments, stated,
“This is certainly a positive sign because I focus on investing in companies whose estimates are being raised,
as these stocks are likely to have favorable earnings prospects.”
His firm actively purchases shares in industrial companies linked to data center infrastructure projects.

However, recent signs of economic fragility could raise concerns about future profit expectations.
US employers reduced hiring in April, and the unemployment rate unexpectedly increased.

Analysts Expectations

Interestingly, despite the raised estimates for the second quarter,
analysts’ projections for the entire year of 2024 have remained almost unchanged.
Wall Street predicts that S&P 500 companies will earn about $245 per share in 2024,
which is similar to last year’s forecasts, per Bloomberg Intelligence data.

Analysts are cautious about revising their second-half forecasts until more companies issue
their earnings guidance in the upcoming quarters. About 25% of S&P 500 companies offer quarterly guidance,
with around 80 already providing EPS guidance for the second quarter, showing stagnant revenue forecasts.

Traditionally, stocks respond more significantly to guidance than actual results,
and traders have penalized companies that have provided weaker-than-expected forecasts.

Earnings Announcements

In the current earnings reporting cycle, the average stock has performed nearly 7% worse than
the S&P 500 the day after announcing results if the company provided downward guidance on earnings and sales
According to Bloomberg Intelligence data, this is the poorest performance since early 2020.

Major US retailers like Home Depot Inc. and Walmart Inc. are set to report next week,

offering vital insights into consumer strength, economic growth trajectories, and corporate profitability.
Target Corp and Lowe’s Cos are scheduled to report the following week,
along with Nvidia Corp, the last of the so-called Magnificent Seven companies to report on May 22.

Scott Ladner, Chief Investment Officer at Horizon Investments, noted,
“The profit trajectory from here appears quite strong,
although there is increasing anxiety about whether consumers are beginning to feel the pinch.
I’m keen to see if middle-income consumers are altering their spending habits
as revenue growth has not kept pace with profit expectations.”

Optimism in Wall Street for S&P 500 Earnings Growth

Optimism in Wall Street for S&#038;P 500 Earnings Growth

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Optimism in Wall Street for S&P 500 Earnings Growth