Earnings Estimates Stabilize: A Closer Look

Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>

Here are the key points:

Making Sense of Earnings Expectations for 2024 Q2 and Beyond

The start of Q2 coincided with heightened tariff uncertainty following the punitive April 2 ^nd tariff announcements. While the onset of the announced levies was eventually delayed for three months, the issue has understandably weighed heavily on estimates for the current and coming quarters, particularly in the first few weeks after the April 2 ^nd announcement.

The expectation at present is for Q2 earnings for the S&P 500 index to increase by +5.2% from the same period last year on +3.8% higher revenues. The chart below shows how Q2 earnings growth expectations have evolved since the start of the year.

While it is not unusual for estimates to be adjusted lower, the magnitude and breadth of Q2 estimate cuts are greater than we have seen in the comparable periods of other recent quarters.

Since the start of the quarter, estimates have come down for 14 of the 16 Zacks sectors, with the biggest declines for the Transportation, Autos, Energy, Construction, and Basic Materials sectors. The only sectors experiencing favorable revisions in this period are Aerospace and Utilities.

Estimates for the two largest earnings contributors to the index – Tech & Finance – have also declined since the quarter began.

Tech sector earnings are expected to be up +12% in Q2 on +10.5% higher revenues. While these earnings growth expectations are materially below where they stood at the start of April, the revisions trend appears to have notably stabilized lately, as we have been flagging in recent weeks. You can see this in the sector’s revisions trend in the chart below.

This stabilizing turn in the Tech sector’s revisions trend can be seen in expectations for full-year 2025 as well, as the chart below shows.

The two charts above show that estimates for the Tech sector have stabilized and are no longer under the type of downward pressure experienced earlier in the quarter. The Tech sector is much more than just any another sector, as it alone accounts for almost a third of all S&P 500 earnings.

The Earnings Big Picture

The chart below shows expectations for 2025 Q2 in terms of what was achieved in the preceding four periods and what is currently expected for the next three quarters.

The chart below shows the overall earnings picture for the S&P 500 index on an annual basis.

While estimates for this year have been under pressure lately, there haven’t been a lot of changes to estimates for the next two years at this stage.

Stocks have recouped their tariff-centric losses, although the issue has only been deferred for now. While some of the more dire economic projections have eased lately, there is still plenty of macro uncertainty that will likely continue to weigh on earnings estimates in the days ahead, particularly as we gain visibility on the tariffs question.

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