{"id":235907,"date":"2024-04-17T12:43:53","date_gmt":"2024-04-17T16:43:53","guid":{"rendered":"https:\/\/aptuscapitaladvisors.com\/?p=235907"},"modified":"2024-04-17T12:43:53","modified_gmt":"2024-04-17T16:43:53","slug":"aptus-musings-q1-2024-earnings-preview","status":"publish","type":"post","link":"https:\/\/aptuscapitaladvisors.com\/aptus-musings-q1-2024-earnings-preview\/","title":{"rendered":"Aptus Musings: Q1 2024 Earnings Preview"},"content":{"rendered":"

A repeated question that I\u2019ve continued to receive is:\u00a0What\u2019s Going to Kill the Market Rally?<\/em>\u00a0In fact, this was the exact question I was asked on Fox Business\u2019s Varney & Co this week. There\u2019s been a lot of people stating: 1) Geopolitical Risks (queue Saturday night), 2) A second bout of inflation, and 3) Lower-than-expected rate cuts in \u201824.<\/p>\n

While all those events could derail or cause a healthy pullback \u2014pullbacks are healthy (on average, the S&P 500 witnesses\u00a0three<\/em>\u00a05% pullbacks and\u00a0one<\/em>\u00a010% pullback on an annual basis)\u2014 I fully believe that growth (or lack thereof) will be the culprit to something more material and structural.<\/p>\n

Remember, stocks have levers for growth, while fixed income does not. We\u2019ve continued to witness positive correlations between the asset classes. But take notice of the below; I think it\u2019s quite interesting. As of EOD 4\/15\/24, the max peak-to-low for the market and bonds is as follows (it may surprise people):<\/p>\n

Peak-to-Low in 2024 (the maximum drawdown year-to-date is today \u2013 4\/15\/24)<\/u>
\nS&P 500:\u00a0-3.66%<\/span>
\nUS Barclays Agg:\u00a0-4.02%<\/span><\/p>\n

This is exactly why growth and increasing allocations to growth without taking on more risk are so important. So, let\u2019s focus on the earnings profile heading into Q1 2024 earnings season. If you’d like to view our full Quarterly Market presentation, please reach out.<\/p>\n

 <\/p>\n

Q1 2024 Earnings Preview<\/strong><\/h5>\n

 <\/p>\n

This quarter, my big focus is on demand. Why<\/em>? Well, the market has finally seen a turnaround in earnings after a full year of no earnings growth (we were technically in an earnings recession back in early 2023). This EPS growth was largely driven by margin expansion. I believe that the next leg of the earnings upcycle will be led by volumes. Operating leverage should drive margins further as demand recovers. As long as margins continue to remain insulated, so should current market valuation.<\/p>\n

 <\/p>\n

\"\"<\/p>\n

 <\/p>\n

Last quarter was another strong quarter for earnings, beating consensus by 4% and EPS growth accelerating to +8% YoY. While macro data has been mixed vs. consensus since last quarter, general trends remain positive, and March\u2019s Retail Sales were a prime example (plus they revised February higher to +0.9% from +0.6%). That leads us to this upcoming quarter.<\/p>\n

Year-to-date, earnings expectations for Q1 2024 have been cut by 2%, led by Energy and Materials. Historically, first quarter earnings are cut on average by 4% so this is a positive.\u00a0 Yet, overall earnings are expected to grow 4% – 5% YoY in Q1 \u201924. As for revenue growth, it is expected to be +3%, which is comparable to the levels that we saw during the fourth quarter. One item worth noting is that the consensus currently shows revenue growth accelerating for the overall index throughout the remainder of the year, ending 2024 at north of 5%.<\/p>\n

For the year, earnings growth still sits at about $243\/$244, which would be about a 10.5% growth rate. 2025 is still sitting between $276\/$277, for a growth rate of 13%. The acceleration of growth that is expected into next year is encouraging, although it\u2019s starting to feel as though some of that growth may be pulled forward into this year. In my opinion, the biggest risk to these numbers is that higher oil prices could create the surprise for 2024 EPS which would likely eat away at 2025\u2019s number.<\/p>\n

 <\/p>\n

\"\"<\/p>\n

 <\/p>\n

When it comes to earnings, you need to mention the Magnificent Seven (\u201cMag. 7\u201d). This group of stocks posted 63% earnings growth YoY in Q4 \u201823, driving growth for the S&P 500 (ex-Mag. 7 flat YoY). But going forward, earnings are expected to decelerate for the Mag. 7 but accelerate for the other 493, with the growth differential essentially merging by Q4 \u201824. Given the high correlation between Tech’s outperformance in stocks vs. earnings, we expect the narrowing growth differential to be a catalyst for the market to broaden out.<\/p>\n

 <\/p>\n

\"\"<\/p>\n

 <\/p>\n

Over the next few weeks, we\u2019ll see to what degree better economic data and hotter inflation lead to better earnings, or whether these individual data points predict a weakening that just has not shown up in government economic data yet.<\/p>\n

As always, I\u2019ll have a recap email once earnings season ends. Reach out with questions.<\/p>\n

\u00a0<\/strong><\/p>\n

Disclosures<\/strong><\/h5>\n

 <\/p>\n

Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. The information contained herein should not be considered a recommendation to purchase or sell any particular security. Forward looking statements cannot be guaranteed.<\/em><\/p>\n

This commentary offers generalized research, not personalized investment advice. It is for informational purposes only and does not constitute a complete description of our investment services or performance. Nothing in this commentary should be interpreted to state or imply that past results are an indication of future investment returns. All investments involve risk and unless otherwise stated, are not guaranteed. Be sure to consult with an investment & tax professional before implementing any investment strategy. Investing involves risk. Principal loss is possible.<\/em><\/p>\n

Advisory services are offered through Aptus Capital Advisors, LLC, a Registered Investment Adviser registered with the Securities and Exchange Commission. Registration does not imply a certain level or skill or training. More information about the advisor, its investment strategies and objectives, is included in the firm\u2019s Form ADV Part 2, which can be obtained, at no charge, by calling (251) 517-7198. Aptus Capital Advisors, LLC is headquartered in Fairhope, Alabama. ACA-2404-24.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

A repeated question that I\u2019ve continued to receive is:\u00a0What\u2019s Going to Kill the Market Rally?\u00a0In fact, this was the exact question I was asked on Fox Business\u2019s Varney & Co this week. There\u2019s been a lot of people stating: 1) Geopolitical Risks (queue Saturday night), 2) A second bout of inflation, and 3) Lower-than-expected rate […]<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","content-type":"","inline_featured_image":false,"footnotes":""},"categories":[20,129],"tags":[132,179],"class_list":["post-235907","post","type-post","status-publish","format-standard","hentry","category-blog","category-market-updates-blog","tag-earnings","tag-markets"],"yoast_head":"\nAptus Musings: Q1 2024 Earnings Preview - Aptus Capital Advisors<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/aptuscapitaladvisors.com\/aptus-musings-q1-2024-earnings-preview\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Aptus Musings: Q1 2024 Earnings Preview - Aptus Capital Advisors\" \/>\n<meta property=\"og:description\" content=\"A repeated question that I\u2019ve continued to receive is:\u00a0What\u2019s Going to Kill the Market Rally?\u00a0In fact, this was the exact question I was asked on Fox Business\u2019s Varney & Co this week. 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