The fourth quarter earnings season delivered more good news overall. Sales and
earnings growth once again outpaced sell-side estimates. Sales and earnings grew
9.33% and 12.05%, respectively, with about ninety-six percent of companies reporting
through March 2nd, according to Bloomberg. This is comparable to the prior quarter,
which saw sales grow 8.31% while earnings increased 13.28%. Revenues were 1.88%
above projections, while earnings exceeded forecasts by 5.51%.
Ten of the eleven GICS sectors reported positive earnings growth. The Industrial and
Information Technology sectors led the way. Each sector saw earnings increase by
more than thirty percent, according to Bloomberg. Industries tied to the ongoing AI
buildout were among the strongest contributors. Within Industrials, for example, power
equipment companies were amongst the fastest growers, while semiconductor and
memory storage companies led the way in Information Technology.
Despite solid earnings growth and forecasts, the S&P 500 has barely moved year-to-
date. Markets function as a forward-looking discounting mechanism. Last year’s stock
market rally was built on the belief that earnings growth would accelerate. Corporations
have largely delivered on those earnings expectations. Even so, we think additional
market gains need reports will need to stay strong for several quarters, given elevated
valuations.
Corporations Maintain Momentum in Q4
