Earnings Warnings?

Three key indicators currently suggest profitability may prove more challenging this year.

If economic growth slows yet this year, as I suspect, S&P 500 earnings per share (EPS) is also likely to disappoint most forecasts. Currently, one-year forward consensus S&P EPS growth is about 10.5% above the current estimated 2024 trailing 12-month S&P EPS. Given that annual nominal GDP growth through last year’s third quarter is only 5%, an EPS growth estimate in the coming year of more than 10% seems somewhat aggressive. More importantly, as discussed below, three key indicators currently suggest profitability may prove more challenging this year.