Q4 Earnings Wrap | Nasdaq | U.S. Markets

10 of 11 Giant Cap sectors see constructive earnings growth – most in 3 years

It’s the (unofficial) finish of earnings season, with NVDA reporting earnings yesterday afternoon (they beat, with +71% YoY earnings growth).

And it turned out to be a actually robust quarter (for big caps).

After we did our This autumn earnings preview a month in the past, analysts projected that 4 sectors (Staples, Industrials, Supplies, and Power) would see destructive earnings growth (partly as a result of headwinds from charges and a -10% YoY drop in Power costs).

Quick ahead a month, and solely Power is on monitor for destructive earnings growth. 10 sectors in constructive territory is essentially the most in three years.

And, as we highlighted final summer season, it’s a signal that earnings are actually broadening out past the Magazine 7.

Broad-based earnings growth for Giant Caps, Financials energy ends Small Cap earnings recession

This broad-based energy helped drive the very best earnings growth for the S&P 500 (chart beneath, orange bar) in three years, and the very best for the Nasdaq-100 (lighter blue bar) in a single yr.

For small caps, earnings had been not broad-based, with 4 sectors in destructive territory. But, for the primary time in 2½ years, small caps noticed constructive earnings growth (inexperienced bar). Earnings recession over.

A lot of the rebound for small caps got here from Financials, which noticed +31% YoY earnings growth. As we mentioned in our earnings preview, Financials benefitted from the election boosting trading revenues, and post-election optimism rising lending and dealmaking. (Mid cap Financials additionally noticed +25% YoY earnings growth, however that wasn’t enough to offset destructive earnings growth in 4 sectors).

2025 earnings growth anticipated to carry up (Giant Caps) or flip solidly constructive (Small & Mid Caps)

So, after a principally robust finish to 2024, the query is whether or not earnings can keep robust… or improve in 2025.

And proper now, analysts are optimistic (chart beneath). Earnings growth is both anticipated to remain robust in 2025 (Nasdaq-100® and S&P 500) or flip solidly constructive (S&P 400 and 600).

For mid caps and small caps, it’s straightforward to see why that is:

• They get a favorable comparability towards destructive earnings growth final yr
• They benefit from decrease charges since they’ve more floating charge debt
• And a nonetheless stable economic system
• And any new tax cuts we would see (extending 2017 tax cuts provides no new increase)

For the massive cap Nasdaq-100® and S&P 500, it’s more durable:

• They must handle 10+% earnings a 2^nd straight yr (which they each did in 2017-18)
• When margins are already round file highs
• In an economic system that, whereas nonetheless stable, will seemingly see slower growth than 2024
• And so they’re much less uncovered to floating charges, so decrease charges gained’t help as a lot

One factor that would help massive caps is that analysts project the latest broadening of to proceed. After a couple sectors noticed destructive earnings growth final yr, all sectors are projected to see constructive growth in 2025. We’ll get our first take a look at whether or not massive caps can meet these lofty expectations in a couple months when Q1 earnings season begins.

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