Earnings Picture Remains Strong: A Closer Look -

Earnings Picture Remains Strong: A Closer Look

Jan 22, 2025Jeremy ParkinsonFinance0

Image Source: Pixabay

The picture emerging from the 2024 Q4 earnings season is one of strength and improving outlook, with the companies not only coming ahead of estimates but also providing reassuring guidance for the coming quarters.

Total earnings for the 62 S&P 500 companies that have reported results are up +19.6% from the same period last year on +8.4% higher revenues, with 82.3% beating EPS estimates and 69.4% beating revenue estimates.

The earnings and revenue growth pace for the companies that have reported Q4 results represents a significant improvement over what we had seen in other recent periods. With respect to the Q4 beats percentages, the EPS beats percentage is tracking modestly above the average for the preceding 20 periods, while the revenue beats percentage is a hair below the 20-quarter average.

For the Finance sector, we now have Q4 results for 41.3% of the index’s market capitalization in the S&P 500 index. Total earnings for these companies are up +26.2% from the same period last year on +10.9% higher revenues, with all the companies beating EPS estimates and 77.3% beating revenue estimates. This is notably better performance from these banks relative to other recent periods.

If actual 2025 earnings results turn out to be as currently expected, this will be the first time since 2018 when all 16 Zacks sectors achieved positive earnings growth (to be precise, the Zacks Autos sector had modestly negative earnings growth in 2018).

Notable Earnings Results
Of the latest earnings releases, the blockbuster Netflix (NFLX – Free Report) release contrasts with the underwhelming guidance in the Johnson & Johnson (JNJ – Free Report) report.Netflix has truly become the streaming leader, with the ad-supported subscription tier adding to the company’s growth. The high-margin advertising revenue benefits Netflix’s margins, as the roughly doubling of Q4 earnings relative to the year-earlier period shows. Netflix shares were up more than +75% over the past year before the awe-inspiring numbers, with the earnings results and price-hike announcements pushing them to a new all-time high.Johnson & Johnson shares were struggling before the Q4 earnings release, with the stock down -9.7% over the past year, significantly underperforming the Zacks Medical sector as well as the broader market. The company beat top- and bottom-line estimates, but the full-year 2025 revenue guidance is below the current Zacks revenue consensus. The chart below shows the one-year performance of Netflix, Johnson & Johnson, and the S&P 500 index.
Image Source: Zacks Investment Research

Tech to Remain a Key Growth Driver
The Tech sector has been a significant growth driver in recent quarters, and the trend is expected to continue in 2024 Q4 and beyond. For Q4, Tech sector earnings are expected to be up +14.9% from the same period last year on +10.1% higher revenues, the 6^th quarter in a row of double-digit earnings growth.This would follow the sector’s +22.6% earnings growth on +11% higher revenues in 2024 Q3. As the chart below shows, the sector’s growth trajectory is expected to continue in the coming quarters.Image Source: Zacks Investment ResearchIn addition to the Tech sector’s strong growth profile, the sector is also among the few sectors whose earnings outlook is steadily improving. This shows up in the revisions trend for the Tech sector for both Q4 and full year 2025.

The Earnings Big Picture
The chart below shows expectations for 2024 Q4 in terms of what was achieved in the preceding four periods and what is currently expected for the next four quarters.
Image Source: Zacks Investment ResearchThe chart below shows the overall earnings picture on an annual basis.
Image Source: Zacks Investment ResearchAs you can see, the expectation is for double-digit earnings growth in each of the next two years, with the number of sectors enjoying strong growth notably expanding from the narrow base we have been seeing lately.In fact, 2025 is expected to have all 16 Zacks sectors enjoy earnings growth, with 8 of the 16 Zacks sectors expected to produce double-digit earnings growth. Unlike the last two years, when the Mag 7 group drove all or most of the aggregate earnings growth, we will have double-digit S&P 500 earnings growth in 2025, even without the contribution from this mega-cap group.More By This Author:Earnings Season Scorecard And Fresh Analyst Reports For Chevron, Merck & OthersWhat Do Early Q4 Earnings Results Show?Q4 Earnings Season Kicks Off Strong