S&P 500 Earnings Growth Projected at 28.7% for Q3
S&P 500 third-quarter earnings are projected to rise 28.7%, marking the third straight quarter of high growth despite macroeconomic headwinds.
Key points
- S&P 500 Q3 earnings growth is projected at 28.7 percent, the third straight quarter above 25 percent.
- The tech sector's forward earnings multiple dropped from 32 to 21 since last October.
- The S&P 500 forward P/E ratio is 19.1, below its five-year average of 19.8.
S&P 500 third-quarter earnings growth is projected at 28.7 percent. This figure marks the third consecutive quarter of annual growth above 25 percent.
The index stands up nearly 12 percent year to date. This resilience persists despite high oil prices and a hawkish Federal Reserve.
Earnings Drive Recent Market Resilience
FactSet analysts report that earnings estimates have been revised upward. The projected growth rate increased from 26.6 percent as of June 30.
Sustained earnings expansion supports higher valuations for the broader index. Investors assign premium multiples to companies demonstrating consistent growth.
Tech Valuation Premium Narrows Significantly
The forward earnings multiple for the technology sector fell to 21. It was 32 in October of last year, according to Truist strategists.
The relative valuation premium for tech stocks is now near 9 percent. This level approaches the lowest point in the past decade.
Keith Lerner notes that this reset reflects uncertainty about AI model development. The sector now prices in more risk than earlier in the cycle.
Forward Valuation Remains Below Historical Average
The S&P 500 forward price-to-earnings ratio stands at 19.1 times. This figure is below the five-year average of 19.8 times.
Current valuations appear attractive after the index pulled back from August highs. Lower prices improve the risk-reward profile for new investors.
