The article “S&P 500 Earnings: Still Solid After Nvidia And Walmart And A Look At Apple” provides an overview of the current state of S&P 500 earnings, specifically focusing on the impact of recent reports from Nvidia, Walmart, and Apple. The forward 4-quarter estimate (FFQE) has increased slightly, leading to a small expansion in the price-to-earnings ratio (P/E). However, the S&P 500 earnings yield has declined for eight consecutive weeks. The article also delves into the earnings growth for the S&P 500 in the fourth quarter, with Walmart’s report showing a positive EPS growth of 10%. Additionally, it discusses the unexpected downward revenue revisions for Apple and the company’s challenges in innovating beyond its iPhone product. Overall, the article provides valuable insights into the current state of S&P 500 earnings and the performance of key companies in the market.
Table of Contents
Forward 4-quarter estimate
The forward 4-quarter estimate (FFQE) for the S&P 500 has increased to $242.76 from last week’s $242.57 and January 5th’s print of $243.98. This suggests that there is positive momentum in the earnings estimates for the S&P 500 companies over the next four quarters.
P/E Expansion
The price-to-earnings (P/E) ratio on the FFQE has also expanded slightly, from 20.7x last week to 21x currently. This indicates that investors are willing to pay a higher multiple for the expected earnings of the S&P 500 companies. P/E expansion is generally seen as a positive sign for the stock market.
Decline in S&P 500 Earnings Yield
On the other hand, the S&P 500 earnings yield has declined for eight consecutive weeks. It started at over 5% at the beginning of the year and is now at 4.77%. A declining earnings yield suggests that investors are demanding a lower return on their investment relative to the earnings generated by the S&P 500 companies.
Q4 ’23 EPS Growth
Despite the negativity surrounding the fourth quarter of 2023, the actual earnings per share (EPS) growth for the S&P 500 companies in Q4 ’23 was +10% as of today. This is a positive surprise and indicates that the companies in the index managed to perform well despite the challenges they faced during that period.
No significant impact on S&P 500 earnings
Nvidia, one of the well-known technology companies, has not had a significant impact on the earnings of the S&P 500 as a whole. While Nvidia’s performance is closely watched by investors, it does not have a substantial weight in the index, and therefore its earnings do not have a major influence on the overall S&P 500 earnings picture.
Impact on EPS revisions
Walmart, a major retail corporation, has had an impact on EPS revisions. The company’s guidance spooked analysts, resulting in very little upward revisions to EPS for calendar years ’25 and ’26. This suggests that investor sentiment towards Walmart’s future earnings is cautious, and there is a lack of optimism regarding its growth prospects.
Healthy revenue estimates
Despite the cautious sentiment towards Walmart’s earnings, there have been healthy revisions in the company’s revenue estimates. This indicates that analysts see potential for strong top-line growth for Walmart, even if there are concerns about its bottom-line performance.
Negative revisions in EPS
Apple, a technology giant, has experienced negative revisions in its EPS estimates. Since August ’23, there have been negative revisions in Apple’s EPS estimates for each fiscal year. This suggests that analysts have become less optimistic about Apple’s profitability in the coming years.
Downward revisions in revenue estimates
In addition to negative EPS revisions, Apple has also seen downward revisions in its revenue estimates. The decline in revenue estimates by fiscal year is significant, with double-digit percentage declines for each year. This indicates that analysts are less optimistic about Apple’s ability to generate revenue growth in the future.
Slow hardware growth and innovation challenges
The negative revisions in EPS and revenue estimates for Apple can be attributed to factors such as slower hardware growth and innovation challenges. The company’s transition from a primarily hardware-focused business to a services business has been met with difficulties, and there are concerns about its ability to continue innovating in the highly competitive technology industry.
Annual return comparison
When comparing Apple’s stock performance to that of the S&P 500, it becomes apparent that Apple has underperformed. From December 31, 2021, to February 22, 2024, Apple’s annual return was only +1.31%, while the S&P 500 had a return of +4.80%. This suggests that Apple’s stock has been relatively flat over the past 26 months.
Flat performance over 26 months
The fact that Apple’s stock has been almost flat for 26 months raises questions about its ability to generate significant returns for investors. Despite its reputation as a leading technology company, Apple’s stock has not delivered the same level of growth as the broader market.
FFQE increase
The forward 4-quarter estimate (FFQE) for the S&P 500 has seen a slight increase this week, reaching $242.76. This is a positive sign, indicating that earnings estimates for the S&P 500 companies are holding steady or improving.
P/E Expansion continues
The P/E ratio on the FFQE has expanded slightly, showing continued P/E expansion for the S&P 500. This suggests that investors are willing to pay a higher multiple for the expected earnings of the index’s constituent companies.
Decline in S&P 500 earnings yield
The earnings yield of the S&P 500 has declined for eight consecutive weeks. This indicates that investors are demanding a lower return on their investment compared to the earnings generated by the index’s companies. However, the decline has not been significant, suggesting that better-than-expected earnings have prevented a further decline.
Q4 ’23 bottom-up estimate increase
The bottom-up estimate for Q4 ’23 earnings has increased to $57.14 from the early January estimate of $54.69. This suggests that analysts are becoming more optimistic about the earnings prospects of the S&P 500 companies in the fourth quarter of 2023.
EPS and revenue surprises
The S&P 500 EPS upside surprise remains at 6.8%, indicating that companies in the index are continuing to outperform earnings expectations. The revenue upside surprise stands at 1.1%, suggesting that companies are also exceeding revenue expectations to some extent.
Companies to watch
In the upcoming weeks, several companies will be releasing their earnings for the quarter ending in February 2024. Some notable companies to watch include Nike, FedEx, and Micron, among others. These companies’ earnings reports will provide insights into their performance during the period and could impact their stock prices and the overall market sentiment.
Interesting trends
The revenue estimate revisions for Apple are interesting, as they show significant declines by fiscal year. There is a double-digit percentage decline in revenue estimates for each year, indicating that analysts are less optimistic about Apple’s revenue growth potential. This trend suggests that investors may adjust their expectations for Apple’s financial performance in the future.
Expectations for upcoming earnings releases
Based on the information presented, the expectations for the upcoming earnings releases of S&P 500 companies are mixed. While there have been positive revisions to the FFQE and some healthy revenue estimates, there are also negative revisions in EPS and revenue for Apple, as well as cautious sentiment towards Walmart’s earnings.
Disclaimer and cautionary note
It is important to note that the information presented in this article is for informational purposes only and should not be considered as investment advice. Past performance is not indicative of future results, and investing in the stock market carries risks. Investors should conduct their own research and consult with a financial advisor before making investment decisions.
