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Perspectives

4Q EPS Growth Close To 15% Sales Growth Approaching 5%

by Fortem Financial February 10, 2025

With the fourth quarter reporting season more than 60% reported, both earnings and sales growth have been quite strong. EPS growth is expected to be 14.8%, with 9 of the 11 sectors exceeding estimates from the start of the quarter.

Sales growth is also expected to be strong overall with estimates sitting at 4.8%, with 9 of 11 sectors currently exceeding estimates from the beginning of the reporting season. While there is still 40% of the index left to report, there are few that could really sway the EPS figure. It would be safe to say that 4Q saw double digit growth again.

 

S&P 500 4th Quarter Earnings Scorecard

 

First Material Revisions To 2025 EPS Came Last Week

Despite a strong reporting season, the 2025 EPS figure saw its first material revision in overall EPS last week. To be fair it wasn’t a broad based decline in EPS for each quarter, but rather 1Q was revised lower due to 4Q being strong. 2025 EPS now sits closer to $271, which equates to a growth rate of 10.8%. Our view is that estimates will continue to come in this year as we believe earnings could be closer to $266.

 

S&P 500 EPS by Quarter ($)

 

Large Caps Far Less Interest Rate Sensitive

Much attention has been given to interest rates, as it should, but they are much more significant for the small cap trade than they are for large caps. Over the past 6+ months interest expense as a percentage of total debt for the S&P 500 has been roughly unchanged at 4.2%, while small caps saw the same figure rise to greater than 7%.

Today, it sits on the 7% level for small caps, but companies continue to look for a reprieve. We suspect this number should continue to slowly decline but large caps remain less sensitive here. With no major maturity wall for large caps, this appears to be more of a normalization.

 

Interest Expense as a Percent of Total Debt Russell 2000 vs. S&P 500

Source: Strategas

 

Market and Index Changes for the Week Ending 2/7/2025

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments. Data provided by Refinitiv.

 

Sincerely,

Fortem Financial
(760) 206-8500
team@fortemfin.com

 

 

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