Investing.com – UBS expects to see an 8.4% year-over-year increase in earnings per share (EPS) for the fourth quarter of 2024.
Although growth appears slower than that seen in previous quarters, UBS expects the final numbers to approach 12%, supported by historical trends of upward revisions. A similar pattern was observed in Q3, where EPS growth ended at 8.9%, well above the initial estimate of 4%.
“Earnings estimates follow a predictable pattern: they start very high, are revised lower as reporting season approaches, and are topped by actual results,” UBS strategists led by Jonathan Golub said in a note.
“Over the past two months, Q4 estimates have remained steady, defying the normal downward trend. However, this recent strength is entirely attributable to technology-related companies.
The technology sector continues to dominate earnings growth, with TECH+ stocks expected to rise 20.4%, compared to just 2.5% for non-technology sectors.
However, UBS notes that consensus EPS growth expectations for technology companies are diverse. For example, Nvidia (NASDAQ:) is expected to see its earnings rise by 62%, followed by Amazon (NASDAQ:) by 52.6%, and Alphabet (NASDAQ:) by 26.1%.
Meanwhile, other tech giants, such as Microsoft (NASDAQ:) and Apple (NASDAQ:), are expected to post more moderate growth of 6.9% and 11.6%, respectively.
TECH+ plays a dominant role in driving Q4 growth, representing seven of the top ten contributors and adding 5.2% to the overall S&P 500 EPS increase as a group.
On the other hand, energy remains a drag on overall performance, with earnings per share expected to contract by 27.5%. This sector has consistently impacted earnings throughout 2024 due to ongoing challenges.
Meanwhile, the financial sector is expected to post strong growth of 17.8%, largely due to the largest investment banks, such as Bank of America Corp (NYSE:), JPMorgan Chase (NYSE:), and Bank of America Corp ( NYSE:), JPMorgan Chase (NYSE:), Morgan Stanley (NYSE:), which benefits from prior period charges.
“On an average basis, it is expected to be the fastest growing group, surpassing TECH+ (10.5% vs. 8.5%),” UBS highlights.
Interestingly, revisions to Q4 earnings estimates were less negative than usual, with strength concentrated in technology-related companies. Over the past two months, estimates have remained steady, defying the usual downward revisions seen before the reporting season.
UBS notes that early reports – 20 companies whose quarters ended outside the cycle – beat expectations by 4.3%, just below the long-term average of 4.8%, although somewhat weaker than in the previous quarters. The last.
