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LPL Financial said its profit calls for S&P 500 (SP500)(SPY) companies appear conservative following Corporate America’s “excellent” first-quarter earnings season that’s seen growth driven largely by Big Tech results.
LPL said it’s likely to raise its 2024 per-share earnings call for S&P 500 companies from $235 after large-cap companies turned in earnings growth of nearly 7% for the quarter that’s about to wrap up. The current consensus estimate for S&P 500 EPS near $243 may be achievable, it said. LPL also said its $250 EPS estimate for 2025 is “probably too low,” and may be bumped up.
“Upside to earnings estimates is par for the course, but guidance is where an earnings season can go from good to great,” Jeff Buchbinder, LPL’s chief equity strategist, said in a Tuesday note. “On that score, this earnings season was great, as estimates rose for this year and next — an unusual occurrence.”
Profit estimates for 2024 and 2025 rose an average of 4.5% for the top five technology names – Alphabet (GOOG) (GOOGL), Amazon (AMZN), Meta (META), Microsoft (MSFT), and Nvidia (NVDA). As a whole for the benchmark (IVV)(VOO), earnings estimates rose about 0.5% compared with an average reduction historically near 2%, he said.
Guidance-wise, Amazon (AMZN) and Alphabet (GOOG)(GOOGL) stood out with profit estimates rising 9%-10% for 2024 and 2025, respectively.
Slower economic growth may be a headwind in 2025, but the AI capital investment cycle remaining strong could lead to another year of high-single-digit earnings expansion, Buchbinder said.
“If a slowing economy weighs on earnings in the second half and inflation remains frustratingly sticky, then we would consider fair value for the S&P 500 at year-end to be closer to our original prediction in the 4,850–4,950 range,” the strategist said.
LPL will release its 2024 midyear outlook in early July.
