Investing.com — UBS forecasts an 8.4% year-over-year increase in earnings per share (EPS) for the fourth quarter of 2024.
Although it appears slower than growth seen in previous quarters, UBS expects the final numbers to line up closer to 12%, supported by historical trends of upward revisions. A comparable trend was observed in the third quarter, where EPS growth reached 8.9%, far exceeding the initial estimate of 4%.
“Earnings estimates follow a predictable pattern: They start too high, are adjusted downward as reporting season approaches, and are overtaken by actual results,” UBS strategists led by Jonathan Golub said in a note.
“Over the past two months, estimates for the fourth quarter have remained stable, defying the normal downward trend. However, this recent strength is entirely attributable to technology-related companies,” they added.
The technology sector continues to dominate earnings growth, with TECH+ expected to grow 20.4%, compared to just 2.5% for non-technology sectors.
However, consensus EPS growth forecasts for technology companies vary, UBS points out. For example, Nvidia (NASDAQ:) is expected to see its earnings increase by 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 expected to see more moderate growth of 6.9% and 11.6%, respectively.
TECH+ plays a dominant role in Q4 growth, accounting for seven of the top ten contributors and adding 5.2% to the overall EPS increase of the S&P 500 as a group.
In contrast, the energy sector continues to weigh on overall performance, with EPS expected to contract by 27.5%. This sector has consistently weighed on earnings throughout 2024 due to continued challenges.
At the same time, financial stocks are expected to post robust growth of 17.8%, largely attributed to the largest investment banks, such as Bank of America Corp (NYSE:), JPMorgan Chase (NYSE:) and Morgan Stanley (NYSE:), which benefit from the expenses of the previous period.
“On a median basis, is expected to be the fastest growing group, surpassing TECH+ (10.5% vs. 8.5%),” underlines UBS.
Interestingly, fourth-quarter earnings estimate revisions were less negative than usual, with the strength concentrated on technology-related companies. Over the past two months, estimates have remained stable, defying downward adjustments typical of the reporting season.
UBS points out that early-reporting companies – those with quarters ending out of cycle – beat expectations by 4.3%, slightly below the long-term average of 4.8%. but a little weaker than in recent quarters.
