At this juncture of the Q4/24 earnings season, S&P 500 companies are reporting strong results relative to expectations. Both the percentage of S&P 500 companies reporting earnings beats and the magnitude of earnings surprises are above their 10-year averages. In addition, companies are reporting the highest year-over-year earnings growth rates in the past three years.

So far, 62% of S&P 500 companies have reported actual results for Q4 2024. Of these, 77% have beat consensus estimates, which is equal to the 5-year average of 77% but above the 10-year average of 75%. In aggregate, companies are reporting earnings that are 7.5% above estimates, which is below the 5-year average of 8.5% but above the 10-year average of 6.7%.

The blended (combines actual results and estimated results for companies that have yet to report) earnings growth rate for Q4/24 is 16.4%, compared to an earnings growth rate of 11.8% a year ago. This marks the highest year-over-year earnings growth rate reported by the S&P500 since Q4 2021. It will also mark the sixth consecutive quarter of year-over-year earnings growth for the index.

On a sector basis, eight of the eleven sectors are reporting year-over-year earnings growth for Q4. Six of these eight sectors are reporting double-digit growth: Financials, Communication Services, Consumer Discretionary, Information Technology, Health Care, and Utilities.

The earnings backdrop remains solid but what provides us with even more optimism in the stock market is the price performance following the earnings results. As shown below, companies with earnings beats have outperformed in terms of immediate price action post results while those that missed are lagging. This suggests to us that the stock market is reacting to earnings in a logical manner. While we expect the busy news flow out of Washington (aka Trump) to cause near term volatility spikes, the earnings season to-date gives us confidence that the stock market/investors still care about fundamentals and rationality.