US stock market: Q4 earnings season preview

Investing.com — UBS forecasts the to see an 8.4% year-over-year increase in earnings per share (EPS) for the fourth quarter of 2024.

Despite appearing slower than the growth seen in previous quarters, UBS expects final figures to align closer to 12%, supported by historical trends of upward revisions. A comparable pattern was observed in Q3, where EPS growth ended at 8.9%, far exceeding the initial 4% estimate.

“Earnings estimates follow a predictable pattern: they start too high, are adjusted lower heading into reporting season, and are topped by actual results,” UBS strategists led by Jonathan Golub said in a note.

“Over the past 2 months, 4Q estimates have remained flat, defying the normal downward trend. However, this recent strength is entirely attributable to tech-related companies,” they added.

The technology sector continues to dominate earnings growth, with TECH+ expected to rise 20.4%, compared to just 2.5% for non-tech sectors.

However, consensus EPS growth forecasts for tech companies are varied, UBS points out. For instance, Nvidia (NASDAQ:) is projected to see its earnings surge by 62%, followed by Amazon (NASDAQ:) at 52.6%, and Alphabet (NASDAQ:) at 26.1%.

At the same time, other tech giants, such as Microsoft (NASDAQ:) and Apple (NASDAQ:), are forecasted to deliver more moderate growth of 6.9% and 11.6%, respectively.

TECH+ plays a dominant role in driving Q4 growth, accounting for 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 EPS expected to contract by 27.5%. This sector has consistently weighed on earnings throughout 2024 due to ongoing challenges.

Meanwhile, financials are set to deliver robust growth of 17.8%, largely attributed to the largest investment banks, such as Bank of America Corp (NYSE:), JPMorgan Chase (NYSE:), and Morgan Stanley (NYSE:), which benefit from prior-period charges.

“On a median basis, are expected to be the fastest growing group, outpacing TECH+ (10.5% vs. 8.5%),” UBS highlights.

Interestingly, revisions to Q4 earnings estimates have been less negative than usual, with strength concentrated in tech-related companies. Over the past two months, estimates have remained flat, defying the typical downward adjustments seen ahead of reporting season.

UBS points out that early reporters—20 companies with off-cycle quarter ends—have exceeded expectations by 4.3%, slightly below the long-term average of 4.8%, though somewhat weaker than in recent quarters.