S&P 500 earnings season begins with 25% EPS growth forecast

what happened

Seeking Alpha reports that third-quarter earnings season for S&P 500 companies will begin in the coming week. Gina Martin Adams, chief market strategist at HB Wealth, expects the index to post 25% year-over-year growth in earnings per share. That would represent a slowdown from the second quarter’s 34% increase, but remain roughly twice the average quarterly growth of about 12% over the past 10 years.

Excluding the Covid-19 period of 2020-21, S&P 500 earnings growth has averaged about 10%, Adams said. She noted that index companies have exceeded pre-season earnings-growth forecasts every quarter since at least 2013, with the Covid shock in 2020 as the only exception. So far this year, EPS has topped expectations by an average of about 10%, compared with a 5.7% average since the bull market began in 2023.

Adams also said the latest results may be difficult to surpass. In the previous quarter, 86% of companies beat consensus EPS estimates, the highest share since 2021 and well above the 10-year average beat rate of 77%.

why it matters

The market focus will be on whether companies can outperform already elevated expectations. Slower projected growth than in the second quarter makes early reports and corporate commentary especially important for assessing the earnings season.

instruments