Five Key Takeaways From Earnings Season

Key Takeaways

  • Mega-Cap Tech Continues To Drive S&P 500’s Earnings
  • Shareholder-Friendly Activity Is Back!
  • Consumers Are Becoming More Discerning

Happy National Small Business Day! Every year on May 10, small businesses are officially recognized for their contributions to the US economy. And rightfully so. Small businesses are the backbone of the US economy. Today, there are over 33 million small businesses operating across the US. Small businesses employ over 61 million employees—nearly half of the entire American workforce. And a record-breaking 5.5 million new business applications were filed in 2023. Truly impressive! Just as small businesses are a key barometer for the nation’s economic health, large public companies drive the trends in earnings. That is why we pay so much attention to earnings season. With 1Q24 earnings season largely compete with over 88% of the S&P 500’s market cap having already reported, here are our five biggest takeaways:

Mega-Cap Tech Continues To Drive Earnings | Despite elevated valuations, mega-cap tech earnings remain a bright spot, driving the bulk of the S&P 500’s earnings. In fact, the composite of MAGMAN’s earnings (i.e., Microsoft, Apple, Google, Meta, Amazon, and NVIDIA) we track is on pace to climb over 50% YoY. Compare that to the other 494 stocks in the S&P 500, which have roughly flat earnings growth YoY. More important, this is the fifth consecutive quarter that MAGMAN’s earnings have outpaced the rest of the Index. In addition, MAGMAN has had greater top-line sales growth (over 5x higher), stronger net margins (~2.5x greater) and bigger earnings beats (~12% versus 8%) than the rest of the Index. Our composite of mega-cap tech (i.e., MAGMAN) has strongly outperformed the overall market, (50.9% versus 25.4% over the last 12 months), with their outperformance supported by strong fundamentals and superior earnings results.