Weaker 2025 S&P 500 EPS Estimates Follow Same Pattern as Late ’23, Early ’24

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Weaker 2025 S&P 500 EPS Estimates Follow Same Pattern as Late ’23, Early ’24

This simple spreadsheet table tells the story of what’s happening with forward estimates: the 4th quarter, ’24 was a very strong quarter (first two columns).

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S&P 500 EPS growth for Q4 ’24 was expected at +9.5% – +9.6% in early January ’25, but the actual growth rate so far is for Q1 ’24 S&P 500 EPS growth to reach +15.7% or a whopping 620 bp increase. Usually, the typical “upside surprise” for S&P 500 earnings season is 200 – 400 bp’s positive, but like the trend from most of 2024, Q4 ’24 S&P 500 EPS shot the lights out once again. Q4 ’24 S&P 500 revenue growth is also strong as it was originally estimated at +4.2% in early January ’25, but is now at a +4.9% run rate.

2025 S&P 500 EPS and revenue growth rates continue to be revised lower, but that isn’t as alarming as it might seem (at least so far).

Here’s the catch: Q4 ’23 was the same way, i.e. very strong S&P 500 EPS, originally thought to be +4.4% EPS growth until actual EPS growth turned out to be +10.1, or about the same degree of “upside surprise” or another 600 bp’s increase.

Q1 ’24 saw similar negative revisions after the same strong quarter in Q4 ’23, so there is some precedent for seeing a strong finish to one year, and then negative or weaker revisions for the following year.

Ed Yardeni published his thoughts on 2025’s downward revisions this week and he thought it might be due to the numerous tariff announcements by the new Administration, as well as fed rate cuts coming off the table this month.

S&P 500 Data:

• The forward 4-quarter S&P 500 EPS estimate rose a little this week to $270.64 vs last week’s $270.46.
• The PE on the forward estimate is 22.2x versus 22.6x last week.
• The S&P 500 “earnings yield” ended this week at 4.50% versus last week’s 4.42%.

Conclusion:

The patterns for Q4 ’24 and then calendar 2025 S&P 500 EPS estimates are following similar patterns to Q4 ’23 and then 2024 S&P 500 EPS estimates for the expected 4 quarters of 2024.

In other words, no reason to be alarmed quite yet.

Nvidia (NASDAQ:) might take care of that for us, on Wednesday night, February 26th, after the market close.

The GPU giant is still the proxy for the AI trade and the most-watched name in the market. Here’s an article written in early January ’25 on the slowing forward revisions for Nvidia’s EPS and revenue. This table will be updated over the weekend.

We’re finally getting a correction in stocks. Both the S&P 500 and the were rejected at new attempts to make all-time-highs.

Disclaimer: None of this is advice or a recommendation but only an opinion. Past performance is no guarantee of future results. Investing can involve the loss of principal even for short periods of time. All EPS and revenue estimates are typically sourced from LSEG. None of the above information may be updated, and if updated, may not be done in a timely fashion.

Thanks for reading.

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#Weaker #EPS #Estimates #Follow #Pattern #Late #Early

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