Earnings Estimates Keep Increasing: A Closer Look

Core Viewpoint - The finance sector is experiencing a solid start to the Q4 earnings season, with many companies exceeding consensus estimates and providing a stable-to-positive outlook for their businesses [5][7]. Finance Sector Performance - Major banks like JPMorgan, Bank of America, and Citigroup have shown disappointing market reactions despite not having negative Q4 results, indicating a 'sell-the-news' phenomenon after their recent outperformance [2]. - Citigroup shares have outperformed peers and the broader market over the past year, driven by investor confidence in the new management's restructuring plans [3]. - However, shares of Citigroup, Bank of America, and JPMorgan have been declining since the start of the year, with Q4 earnings results contributing to this downtrend [4]. Earnings Growth and Estimates - Total earnings for the 51 S&P 500 companies that reported Q4 results are up 17.2% year-over-year, with revenues increasing by 7.5%. Notably, 88.2% of these companies beat EPS estimates and 72.5% exceeded revenue estimates [5]. - For the finance sector, earnings are up 13.9% year-over-year with revenues rising by 7.0%. Additionally, 90.5% of finance companies beat EPS estimates and 71.4% surpassed revenue estimates [5]. Macroeconomic Outlook - Management teams are optimistic about consumer spending and stable credit quality trends, with a positive outlook for loan demand and investment banking advisory services, despite some policy uncertainties [7]. - The overall outlook remains positive, although there are headwinds related to the administration's credit card plans [7]. Sector Contributions - The tech sector is projected to contribute 36% of the S&P 500's total earnings over the next four quarters and currently represents 42.5% of the index's total market capitalization, highlighting its significant role in the overall earnings picture [16].