S&P 500 Q3 Earnings Growth Projections Continue to Be Revised Lower

S&P 500 earnings growth for the third quarter of 2024 has been revised down to just 3.2%, according to analysts at Strategas. This continued decline is raising concerns for the equity market, which relies on earnings growth to reach new all-time highs.

While it’s typical for estimates to decrease before a reporting season, Strategas emphasizes that the current figure of 3.2% may drop further if major companies fail to meet expectations. The analysts noted, “Growth estimates are walking a fine line,” suggesting a broader weakness across sectors.

Technology, Communications, and Health Care are anticipated to contribute significantly to the index, while Energy is expected to see the largest decline, projected at 21.9%. Other sectors are expected to show growth between -2% and 4%, indicating that earnings growth may be limited this quarter.

Despite a slowdown in recent price appreciation, Technology is highlighted as a standout sector, with 25 companies issuing positive earnings pre-announcements compared to 20 negative ones. This makes it one of only two sectors with earnings per share estimates higher than they were on July 1.

The analysts pointed out that the primary challenge for investors now lies in justifying current valuations. One potential risk for the Technology sector is the softening of South Korean exports, which are closely linked to S&P 500 earnings. While this situation isn’t yet critical, it could affect future growth, according to Strategas.