The S&P 500 is on track to report earnings growth above 7% for the third quarter of 2024. This marks the fifth consecutive quarter of year-over-year earnings growth for the index. Historical data suggests that actual earnings typically outperform estimates.
Over the past decade, S&P 500 companies have exceeded estimates by an average of 6.8%, with 75% of companies beating their mean EPS estimates. This trend results in an average increase of 5.5 percentage points in the earnings growth rate by the end of the earnings season. In the past five years, actual earnings have beaten estimates by an average of 8.5%, with 77% of companies surpassing their EPS targets.
S&P 500 earnings growth expectations
This resulted in an average increase of 7.2 percentage points in the growth rate. More recently, over the past four quarters, actual earnings exceeded estimates by an average of 5.5%, with 78% of companies beating EPS estimates.
This has led to an average increase of 3.1 percentage points. As of October 11, out of 30 S&P 500 companies that reported Q3 earnings, 79% exceeded their mean EPS estimates, with actual earnings surpassing estimates by 5.9%. However, due to downward revisions to EPS estimates, the overall earnings growth rate for the S&P 500 has decreased by 0.3 percentage points to 4.1% from 4.4%.
Given these patterns, the S&P 500 is likely to report a year-over-year earnings growth rate above 7% for Q3 2024. Investors will be closely watching the upcoming earnings season to see if companies can deliver on these expectations and support the growing optimism about avoiding a recession.
