Investing.com — UBS forecasts Q4 2024 earnings per share (EPS) to increase 8.4% year over year.
Despite appearing to be slower than the growth seen in previous quarters, UBS expects the final figures to be closer to 12%, supported by historical trends of upward revisions. A comparable pattern was seen in the third quarter, where EPS growth ended at 8.9%, far higher than the initial estimate of 4%.
“Earnings estimates follow a predictable pattern: They start too high, adjust lower in the reporting season, and are topped by actual results,” UBS strategists led by Jonathan Golub said in a note.
“Over the past 2 months, Q4 estimates have remained flat, defying the normal downward trend. However, this recent strength is entirely attributable to technology-related companies,” they added.
The tech sector continues to dominate earnings growth, with TECH+ expected to grow 20.4%, compared to just 2.5% for non-tech sectors.
However, consensus EPS growth forecasts for technology companies are mixed, UBS points out. For example, Nvidia (NASDAQ: ) projects earnings to rise 62%, followed by Amazon (NASDAQ: ) at 52.6% and Alphabet (NASDAQ: ) at 26.1%.
At the same time, other tech giants such as Microsoft (NASDAQ: ) and Apple (NASDAQ: ) are forecast to post more moderate growth of 6.9% and 11.6%, respectively.
TECH+ played a dominant role in driving growth in the fourth quarter, accounting for seven of the top ten contributors and adding 5.2% to the S&P 500’s overall earnings per share increase as a group.
On the other hand, Energetika continues to drag down overall performance, with an expected EPS decrease of 27.5%. This sector has consistently impacted earnings through 2024 due to ongoing challenges.
Meanwhile, financials are expected to post strong growth of 17.8%, largely attributed to the biggest investment banks, such as Bank of America Corp (NYSE: ), JPMorgan Chase (NYSE: ) and Morgan Stanley (NYSE:), benefiting from prior period fees.
“On a median basis, it is expected to be the fastest growing group, outperforming TECH+ (10.5% vs. 8.5%),” UBS points out.
Interestingly, fourth quarter earnings estimate revisions were less negative than usual, with strength concentrated in technology-related companies. Over the past two months, estimates have remained flat, defying the typical downward adjustments ahead of the reporting season.
UBS points out that early reporters – 20 companies with off-cycle quarter ends – beat expectations by 4.3%, slightly below the long-term average of 4.8%, although slightly weaker than in recent quarters.
