Making Sense of Current Earnings Expectations
This week’s quarterly reports from Nike NKE, Carnival CCL, and three other S&P 500 members for their respective fiscal quarters ending in August will get counted as part of our September-quarter tally. We have already seen such fiscal August-quarter results from 14 S&P 500 members, including results from Oracle, Adobe, FedEx, and others.
We will discuss current expectations for Nike and Carnival later in this note, but we will first review the aggregate Q3 expectations for the S&P 500 index as a whole.
The expectation is for Q3 earnings to increase by +5.3% from the same period last year on +6.1% higher revenues. This would follow earnings growth rates of +12.5% and +12.3% in 2025 Q2 and Q1, respectively.
In the unlikely event that actual Q3 earnings growth for the S&P 500 index turns out to be +5.3% as currently expected, this will be the lowest earnings growth pace for the index since the +4.4% growth rate in 2023 Q3.
Regular readers of our earnings commentary are familiar with us consistently flagging the favorable shift in the revisions trend that has been in place for the last few months. We have regularly featured how Q3 estimates moved higher after the start of the period, marking a shift from the trends observed in the first two quarters of the year.
The positive revisions trend has not been restricted to Q3 alone, as estimates for Q4 have also moved higher lately, as the chart below shows.
Image Source: Zacks Investment Research
Since the start of July, Q4 estimates have increased for 7 of the 16 Zacks sectors, which include the Tech, Finance, and Energy sectors. Other sectors enjoying positive estimate revisions for Q4 include Retail, Utilities, Transportation, and Business Services.
While Q4 estimates for the remaining 11 sectors have been under pressure, the favorable revisions trend for the Tech and Finance sectors is more than enough to offset their effect on the aggregate trends at the index level, as these two sectors alone account for more than 50% of the index’s total earnings.
On the negative side, Q4 estimates remain under pressure for 8 of the 16 Zacks sectors, with the notable estimates pressure at the Consumer Discretionary, Medical, Autos, Industrial Products, and Construction sectors.
The Tech sector, which has been a standout growth driver in recent quarters, is expected to continue playing that role in the coming periods as well. For 2025 Q3, Tech sector earnings are expected to increase +12% on +12.7% higher revenues, with Q4 earnings currently expected to be up +8.7% on +11.4% revenue growth.
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