S&P 500 Earnings: Can Tech Sector Earnings Growth Stay Positive In 2023?

Accounting for 27% of the S&P 500’s market cap, the know-how sector is an enormous deal by way of each market cap weight and earnings weight within the benchmark. TJ Dhillon, a Refinitiv help rep, despatched me a fast be aware detailing that Apple’s (AAPL) earnings weight within the S&P 500 is 6.5% (as of early ’23), versus its market cap weight as of two/24/23 of 6.64%. Whereas the sell-side focuses on “market cap weight” on a regular basis, earnings weight issues.

Readers can click on on the above “anticipated” sector earnings throughout the S&P 500 and – trying on the highlighted strains – 2022 and 2023 anticipated, tech sector earnings development for 2023 is simply barely constructive.

If 27% of the S&P 500’s market cap is anticipating flat-to-negative earnings development in 2023, that’s not good.

The one small constructive to that is that the speed of decline in anticipated development in ’23 remains to be manageable.

S&P 500 knowledge:

• The ahead 4-quarter estimate slid once more this week to $221.71 from final week’s $222.36;
• The P/E ratio this week is 17.9x vs. final week’s 18.3x
• The S&P 500 earnings yield is 5.58%. Bespoke famous that the 1-year Treasury yield is 5.05%, so T-bill yields are approximating the S&P 500 earnings yield (kinda).

Not a lot to inform readers aside from it’s been a sluggish drip decrease for S&P 500 earnings beginning in the summertime of 2022. 2023 anticipated earnings have seen the most important detrimental revisions, which is comprehensible, since we have been in the midst of 2022 and thus already knew the earnings well being.

No query, readers must take earnings on a company-by-company foundation.

The one sector that’s exhibiting constructive earnings revisions and better anticipated 2023 EPS development is Communication Companies, which is Meta (META) and Google (GOOGL, GOOG), and whereas Meta’s EPS confirmed sharply larger EPS revisions for 2023, income revisions proceed to be barely detrimental.

This weblog up to date Meta estimates this previous week, and present consensus is anticipating +5% income development for an anticipated -2% EPS development in 2023, with an 18x ahead a number of. Alphabet is anticipating 6% income development and flat EPS development in 2023 with an 18x a number of.

Alphabet has another powerful quarter of compares with Q1 ’22, then development begins to sluggish materially.

Abstract / conclusion

The monetary sector appeared to get a number of consideration from the mainstream monetary media this previous week, as financials predict – per the IBES knowledge by Refinitiv – the second-best price of EPS development this 12 months, second solely to shopper discretionary at +22.7% (though that anticipated development price is coming down) and simply forward of communication companies at +11.7%.

Having talked about it the final 8 weeks, This autumn ’23 earnings development remains to be exhibiting “robustness” at +10.3%, whereas Q1 and Q2 ’23 at the moment are exhibiting detrimental development y.y and Q3 ’23 has seen decrease revisions. It’s nonetheless too early to make a name on This autumn ’23, however the pattern is the pattern – take note of it.

Tech sector earnings and income development matter. It’s an enormous chunk of the S&P 500.

Take all this with a wholesome grain of salt and appreciable pessimism. Previous efficiency is not any assure of future outcomes. All knowledge is sourced from IBES knowledge by Refinitiv. Capital markets change rapidly, each positively and negatively. If there may be one factor this enterprise is loaded with, that’s – properly – opinions, they usually can change rapidly.

Thanks for studying.

Unique Put up

Editor’s Word: The abstract bullets for this text have been chosen by Looking for Alpha editors.