To The Moon

Key Metrics

• Earnings Scorecard: For Q2 2024 (with 91% of $S&P 500(.SPX)$ companies reporting actual results), 78% of S&P 500 companies have reported a positive EPS surprise and 59% of S&P 500 companies have reported a positive revenue surprise.

• Earnings Growth: For Q2 2024, the blended (year-over-year) earnings growth rate for the S&P 500 is 10.8%. If 10.8% is the actual growth rate for the quarter, it will mark the highest year-over-year earnings growth rate reported by the index since Q4 2021 (31.4%).

• Earnings Revisions: On June 30, the estimated (year-over-year) earnings growth rate for the S&P 500 for Q2 2024 was 8.9%. Nine sectors are reporting higher earnings today (compared to June 30) due to upward revisions to EPS estimates and positive EPS surprises.

• Earnings Guidance: For Q3 2024, 47 $S&P 500(.SPX)$ companies have issued negative EPS guidance and 39 S&P 500 companies have issued positive EPS guidance.

• Valuation: The forward 12-month P/E ratio for the S&P 500 is 20.2. This P/E ratio is above the 5-year average (19.4) and above the 10-year average (17.9).

1.Market Is Punishing Negative EPS Surprises More Than Average for Q2

• Earnings Overview: 91% of $S&P 500(.SPX)$ companies have reported Q2 earnings, with 78% exceeding the mean EPS estimate, outperforming historical averages but with a lower aggregate beat rate of 3.5% compared to the 5-year average of 8.6%.

• Market Response: The market is currently reacting less enthusiastically to positive earnings surprises and more harshly to negative ones than the historical norm.

• Positive Surprises: Companies reporting positive Q2 2024 earnings surprises have seen a smaller average price increase (0.8%) than the 5-year average increase (1.0%) within a four-day window around earnings releases.

• Drivers of Market Reaction: The below-average market response is not attributed to companies' Q3 earnings guidance or analyst estimate revisions. Negative EPS guidance issuance is lower than average, and Q3 EPS estimate revisions align with historical trends.

• EPS Guidance: Fewer S&P 500 companies are issuing negative EPS guidance for Q3 2024 (55%) compared to the 5-year (59%) and 10-year (63%) averages.

• Estimate Revisions: Analysts' revisions to Q3 2024 EPS estimates in July were average, with a 1.8% decrease, consistent with long-term historical averages for the beginning of a quarter.

2,S&P 500 Reporting Largest Year-over-Year Revenue Growth Since Q4 2022

• Earnings Growth: The $S&P 500(.SPX)$ shows a blended earnings growth rate of 10.8% for Q2 2024, which would be the highest since Q4 2021's 31.4%.

• Revenue Growth: The blended revenue growth rate stands at 5.2%, below the 5-year average of 6.7% but above the 10-year average of 5.1%. This would be the largest revenue growth since Q4 2022 (5.4%).

• Consecutive Growth: The index is on track for its 15th consecutive quarter of revenue growth, tying the longest streak recorded from Q3 2016 to Q1 2020.

• Sector Performance: Ten sectors report year-over-year revenue growth, with Information Technology, Energy, and Communication Services leading. Materials are the only sector with a decline.

• Future Projections: Analysts project continued year-over-year revenue growth for the next five quarters (Q3 2024 to Q3 2025), with estimates of 4.9%, 5.4%, 5.8%, 5.8%, and 6.2% respectively.