- Retail sales rose by 0.7% m/m
- Existing home sales fell to 4.19mn
- 1Q24 GDP (first estimate)
- PCE
Recent economic data have continued to underscore the strength of the U.S. economy, and we anticipate GDP grew by 2.2% annualized during the first quarter. While this would be a deceleration relative to last quarter, above trend growth should help prevent a meaningful slowdown in profit growth. With 72 companies having reported 1Q24 earnings, analysts are tracking pro-forma earnings per share (EPS) of $53.25. If realized, this would represent a y/y decline of 0.1% and a q/q decline of 4.1%. Of that annual change, revenues are expected to contribute 0.8% points, while margins and share buybacks are expected to subtract 0.6% points and 0.4% points, respectively.
Based on reports so far and expected results, the growth sectors are largely expected to drive pro-forma earnings growth this quarter. Earnings in information technology and communication services are expected to grow 19.1% and 26.9% y/y, respectively. Within technology, strong demand for AI-related capabilities should continue to drive software earnings, while a rebound in PC shipments off suppressed levels could benefit the hardware segment. Consumer dis- cretionary earnings are expected to grow 11.0% y/y, sup- ported by resilient consumer demand, although a strong U.S. dollar and sluggish global economy will likely keep results in check. Elsewhere, financials are set to improve, while materials, industrials and health care are expected to see earnings contract, with materials and health care both tracking declines of over 20% y/y. Moreover, an average decline in natural gas prices of 24.8% y/y in the first quarter will likely hamper results in the energy sector.
Overall, y/y earnings growth is expected to stay roughly flat with revenues, supported by strong economic activity, as the key driver. However, as economic momentum fades, margins will play an increasingly important role in main- taining profits.
Chart of the Week: Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management. *Change in share count is calculated using the index divisor.
Thought of the week: Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management.
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Originally Posted April 22, 2024 – Weekly Market Recap
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