UBS anticipates the S&P 500 earnings per share (EPS) will grow 8.4% year-over-year in Q4 2024, driven predominantly by the technology sector. While slower than previous quarters, UBS strategists expect final results to approach 12% growth, as historical patterns show upward revisions closer to reporting periods.

Key Observations on Q4 EPS Growth

1. Historical Patterns of EPS Revisions

   • EPS estimates often begin high, are adjusted downward before earnings season, and ultimately surpass expectations.
   • Q3 2024 demonstrated this trend, with EPS growth finalized at 8.9%, far exceeding the initial 4% estimate.
   • Unlike typical trends, Q4 estimates have remained flat over the past two months, suggesting resilience.

2. Technology Sector as the Growth Engine

   • TECH+ earnings are expected to grow 20.4%, a stark contrast to the 2.5% growth projected for non-tech sectors.
   • Top contributors to EPS growth include:
     • Nvidia (NASDAQ:NVDA): +62%
     • Amazon (NASDAQ:AMZN): +52.6%
     • Alphabet (NASDAQ:GOOGL): +26.1%
   • Moderate growth is forecasted for:
     • Microsoft (NASDAQ:MSFT): +6.9%
     • Apple (NASDAQ:AAPL): +11.6%
   • TECH+ contributes 5.2% to the overall S&P 500 EPS growth, accounting for seven of the top ten contributors.

3. Challenges in the Energy Sector

   • Energy EPS is expected to contract 27.5%, continuing its underperformance throughout 2024.
   • This decline offsets gains from other sectors, highlighting ongoing challenges in energy markets.

Broader Implications

• The tech sector's dominance underscores its critical role in driving market performance.
• However, reliance on a single sector could pose risks, especially if tech companies face headwinds such as regulatory challenges or macroeconomic uncertainties.

Data-Driven Analysis with Relevant APIs

For investors and analysts, tools that provide real-time insights into earnings trends and sectoral performance are invaluable:

• Earnings Calendar API: Stay updated on upcoming earnings announcements to track revisions and trends across sectors.
• Sector P/E Ratio API: Evaluate valuation trends to understand sector-level earnings growth.

Conclusion

As Q4 earnings season approaches, UBS's forecast highlights a tale of two markets: robust growth in tech juxtaposed with energy sector struggles. Investors should watch for revisions and focus on technology's ability to sustain its leadership role in driving overall market performance.