In a recent report, Zacks Research Director Sheraz Mian highlighted the strength of the second quarter earnings season of 2024, predicting it to be the strongest since the first quarter of 2022. With the favorable trend in revisions leading up to this reporting cycle, further improvement in the earnings outlook is expected.
For the second quarter of 2024, S&P 500 earnings are projected to increase by 8.6% compared to the same period last year, with revenue also expected to see a 4.7% increase. This growth rate is set to be the highest since the first quarter of 2022.
After four quarters of negative growth, the energy sector is on track to see positive earnings growth in the second quarter. Additionally, the Magnificent Seven companies are anticipated to experience a 25.5% increase in earnings and a 13.2% rise in revenue from the same period last year.
The technology sector has also shown positive growth, with estimates increasing for the second quarter for sectors including utilities, transportation, and autos. Technology sector earnings are forecasted to rise by 15.8% in the second quarter of 2024, contributing significantly to overall S&P 500 earnings.
Top technology stocks like Target platforms GOAL and Nvidia Corporation have seen positive estimate revisions. Notably, Nvidia’s earnings per share estimate for this year has seen significant growth since the beginning of the year. Companies like Oracle and Adobe are expected to maintain favorable momentum due to positive results.
The positive earnings outlook for the technology sector can be attributed to the sector’s margin outlook, which is expected to surpass previous years’ levels. The increasing share of higher-margin software and services in total tech sector profits is driving this trend, along with the optimism surrounding AI’s impact on sector productivity.
While financial sector revenue weakness has impacted overall earnings growth, excluding this sector shows a more favorable earnings growth rate of 9.0%, with nearly half of the year’s earnings growth attributed to revenue growth. Technology, financials, and consumer discretionary sectors are expected to drive margin gains in 2024.
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