The Q4 earnings season has revealed a story of resilience and emerging growth, signaling a potential shift in momentum. While corporate profitability may not be stellar, results have defied the doomsayers and provided a glimmer of hope in the market.

As we approach the end of the Q4 earnings releases for S&P 500 members, several key features stand out, representing a significant shift from recent quarters.

Acceleration in Earnings and Revenue Growth

The pace of Q4 earnings and revenue growth demonstrates a welcome acceleration compared to earlier quarters, indicating a positive trajectory for future periods. Despite modest figures, the improving trend holds substantial significance, with a notable percentage of companies beating EPS and revenue estimates.

Positive Movement on the Margins Front

The shift to positive year-over-year change in net margins, especially after six consecutive quarters in negative territory, is bolstering expectations for earnings growth in the upcoming periods. Certain sectors, including Tech, Consumer Discretionary, Retail, and others, have shown significant improvement in net margins, while others like Medical and Energy faced declines.

Resurgence of the Tech Sector

The Tech sector has displayed a robust return to growth, with a substantial contribution to overall earnings. After a phase of post-Covid adjustment, the sector’s performance, combined with estimates for pending releases, projects a notable increase in earnings and revenues. The significant impact of the Tech sector on the aggregate growth picture cannot be understated.

Dominance of the ‘Magnificent 7’ Companies

The renowned ‘Magnificent 7’ companies, including Apple, Amazon, Alphabet, Microsoft, Meta, Nvidia, and Tesla, have showcased substantial growth in earnings and revenues. Their collective performance has notably influenced S&P 500 earnings and market capitalization.

Stabilized Revisions Trend

The trend of revisions for Q1 2024 and full-year 2024 earnings has stabilized after a phase of substantial negativity. While estimates for certain sectors have seen downward adjustments, they are balanced by positive revisions in others, reflecting a more stable outlook for future expectations.