Written by: Angela Akers

Q3 Earnings season kicked off in earnest Friday with a couple of the big banks up to bat; JPMorgan Chase (JPM) and Wells Fargo (WFC). JPM beat on both the top and bottom lines, while WFC beat on earnings, but revenues were in line with expectations. Next Tuesday, we’ll see where the other big banks, Goldman Sachs, Bank of America and Citigroup, land. But so far, not a bad start.

As far as what we can expect overall for Q3 2024 season, let’s see what the consensus is. Last week, we reported that FactSet expects 4.2% earnings growth for the S&P500. This week, Zacks reported S&P500 earnings expectations at 3.1% earnings growth. Both figures have come down from early estimates of 7.8% and 6.9%, respectively. I read an article the other day entitled, “Earnings reporting season starts this week, and investors don’t expect it to be great” which cited that the downward revisions “could be a sign that Wall Street is losing confidence in corporate America.” Humbly, I disagree.

Personally, I cannot remember a time since I have been working with earnings data for nearly three decades that expectations weren’t revised downward as earnings season approached. This has historically been a means to an end for corporate America. If earnings are revised down, they are closer to the release date, therefore more realistic and are easier to beat. But I digress.

To cut through the noise, innuendos and downward revisions, I base my expectations of S&P500 earnings growth on the data that I intimately know and trust, the VectorVest’s Earnings Growth (GRT). GRT reflects a one to three year forecasted earnings growth rate in percentage, per year. We calculate our proprietary forecasted GRT from historical, current and forecasted earnings data. Since these figures look at least one year into the future, for each quarter, you will want to look at what VectorVest was forecasting during the same quarter in the previous year. For example, I’m expecting earnings growth of around 8% for Q3 2024 because as of September 29, 2023, the S&P500 GRT was 8%.

The chart above illustrates why I trust the VectorVest GRT above all else. In VectorVest, you’re able to track GRT for individual stocks, Sectors, Industries and WatchLists. Earnings growth is the fuel that feeds the earnings engine that drives stock prices higher, so it is important to have An Understanding Of Earnings Growth.

PS. Make sure you check out this week’s “Special Presentation” where Mr. Ryan Shook will walk you through the importance of earnings growth as it relates to long-term price performance!

EARNINGS UPDATE

According to FactSet, 6% of S&P500 companies have reported their Q3 2024 results with 79% beating their earnings estimates and 60% reporting revenues above estimates. As of Friday tonight, our Market Climate Graph shows that the 50-Day MA of the VV S&P500 WatchList Average EPS rose $0.03 per share to $10.17 per share, while forecasted average earnings growth remained unchanged at 9%/yr. The Market Climate Graph shows that the Earnings Trend Indicator, ETI, fell 0.01 point to a level of 1.09. Since it remains above 1.00, the market is in a Bull Market Scenario. Stay tuned for our next Earnings Update.

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