There the rally of the S&P 500 index held will be verified starting this week, with the start of the quarterly reporting season on the US markets. The main American index has already gained 20% this year, equivalent to an increase of 8 trillion dollars in terms of capitalisation, on the expectation of a Fed rate cut, which began in September, and in response to strong growth in corporate profits, in the face of more robust economic growth than expected. But what will happen in the last part of the year? What do you expect for company profits?
The quarterly season starts this week
The Earnings Season will kick off this Thursday with the accounts of Delta Air Lines and Friday with the results of the large US investment banks. Heavyweights like JP Morgan, BlackRock and Wells Fargo will give the results of the third quarter, effectively inaugurating the accounting season. If the earnings trend in the first half of the year was higher than expected, not so bright will be the trend in third quartera period that discounts more modest economic growth and a soft landing economic scenario.
Expectations for earnings growth
Analysts’ expectations for earnings growth of S&P 500 companies are not the best. According to data compiled by Bloomberg, S&P 500 companies are expected to record a quarterly earnings increase of 4.7% compared to a year ago, i.e. the weakest growth of the last four quarters and worsening compared to the +7.9% expected until mid-July.
Based on estimates by Factsetearnings growth for S&P 500 companies for the third quarter of 2024 was by 4.2%, growth for the fifth consecutive quarter, but lower than the growth recorded previously. Analysts have already lowered their profit estimates, as earnings growth of 7.8% was expected in July. For the third quarter of 2024, 60 companies in the S&P 500 they published one negative guidance on EPS and 50 companies expressed positive guidance on EPS.
Eyes on the banks
At a sectoral level, the banks are the only sector expected to experience a profit drop of 12%. Excluding the banking sector, in fact, expectations on profit growth for the financial sector they would improve to +6.9% from -0.4%. Within the banking sector, the regional banking subsector is expected to report modest results (approximately -1%) while performing worse than large diversified banks (expected -13%).
“Although many trends from recent quarters simply continue,” explains Sean Ryan, vice president and head of banking and finance at FactSet, “the start of the monetary easing cycle (and its foreseeable consequences) implies a mitigation, and in some cases a ‘reversal of some of these negative trends.”
