HSBC Outlook on US Stock Q4 Earnings Season: S&P 500 Earnings Bullish, "Seven Giants" Lead, Winners and Losers Overview
HSBC Holdings released a research report stating that the S&P 500 index's earnings expectations for the fourth quarter of 2024 are expected to increase by approximately 12% year-on-year, down from the previous 15%. Although the quarter-on-quarter growth is only 0.6%, the technology sector is expected to achieve a quarter-on-quarter growth of 24%. The earnings growth of the "seven giants" in the U.S. stock market is expected to exceed that of the other 493 constituent stocks, which have a year-on-year earnings per share growth of 9%. Winners include Amazon, which is expected to see strong growth in its cloud computing and advertising businesses
According to the Zhitong Finance APP, the earnings report season for the fourth quarter of 2024 has begun. HSBC Holdings released a research report stating that the earnings expectations for the S&P 500 Index in the fourth quarter of 2024 have been revised down in the past few months, but the year-on-year growth expectation still reaches about 12% (down from the previous expectation of 15% a few months ago), which is one of the highest earnings growth expectations since the first quarter of 2022.
HSBC stated that with the help of a low base, most industries will see strong year-on-year earnings growth, with certain sectors (such as finance, communication services, technology, consumer discretionary, and healthcare) expected to achieve double-digit year-on-year growth.
However, HSBC pointed out that on a quarter-on-quarter basis, the earnings growth expectation is only 0.6%, essentially flat; most industries are expected to see a quarter-on-quarter decline in earnings; the technology sector remains an "outlier," expected to achieve strong quarter-on-quarter earnings growth, with an increase of 24%.
HSBC noted that the earnings growth of the "seven giants" of U.S. stocks—Apple, Nvidia, Microsoft, Alphabet, Meta, Tesla, and Amazon—is still expected to exceed the earnings growth of the other 493 constituent companies in the S&P 500 Index. The latter's year-on-year earnings per share growth is expected to be 9%, continuing the trend of earnings recovery over the past few quarters, which is less than the 23% year-on-year earnings per share growth of the "seven giants," but the gap is narrowing.
HSBC added that for the fourth quarter of 2024, earnings growth will be supported by strong expectations in sectors such as finance (year-on-year growth expected at 39%), communication services (year-on-year growth expected at 23%), and IT (year-on-year growth expected at 15%); energy stocks will continue to drag down earnings growth; earnings for consumer staples, industrials, and utilities are expected to remain flat or decline slightly.
In addition, HSBC also provided a list of potential winners and losers for the fourth quarter earnings report season.
Winners (Buy Rating):
Amazon (AMZN.US) — Ongoing cost reductions and efficiency improvements will continue to impact all segments, with strong growth momentum expected for Amazon Web Services (AWS) and advertising business.
Bank of America (BAC.US) — A long-term winner in the U.S. banking industry, with a clear path to sustainable positive operating leverage; management's outlook has enhanced expectations for continuous growth in net interest income (NII) through 2025, boosting investor confidence.
Hilton Hotels (HLT.US) — Due to its global diversification, extensive segment coverage, and strict execution, Hilton remains one of the most popular companies in the industry.
Intuitive Surgical (ISRG.US) — A pioneer in surgical robotics. Driven by general surgical procedures both domestically and internationally, its surgical volume is expected to maintain resilient growth.
Martin Marietta Materials (MLM.US) — Weather-related demand disruptions seem to have a smaller drag on fourth-quarter performance, with guidance for 2025 potentially stronger than expected.
Oracle (ORCL.US) — Due to the continued strong performance of Oracle Cloud Infrastructure (OCI), the company's revenue and profit margins will exceed market expectations Royal Caribbean Cruises (RCL.US) - Accurately positioned in providing customer experiences in innovative ways; the products offered may drive market share growth and attract new customers into its vacation ecosystem.
Losers (downgrade rating):
AMD (AMD.US) - The company is expected to face more headwinds, as its artificial intelligence (AI) GPU roadmap is not as competitive as previously imagined