Q3 Earnings: What Can Investors Expect?

Q3 Earnings Season Overview - The Q3 earnings season officially starts with companies reporting results for fiscal quarters ending in August, including Oracle and Adobe [1] - Total Q3 earnings for the S&P 500 are expected to increase by +3.8% YoY on +4.6% higher revenues, following +10% earnings growth in the previous quarter [3] - Earnings estimates for Q3 have been revised down more significantly compared to recent periods, with 14 out of 16 Zacks sectors experiencing downward revisions [4] - Despite negative revisions, aggregate earnings for Q3 are expected to reach a new all-time quarterly record [4] Company Performance - Oracle's Q3 results were impressive, solidifying its position in the AI space, with shares up +55.4% YTD [1][2] - Adobe reported strong Q3 results with earnings up +25.8% YoY on +6.9% revenue growth, but shares declined due to underwhelming guidance [1] - Adobe shares are down -10.5% YTD, underperforming the Zacks Tech sector (+18.9%) and the S&P 500 (+17.1%) [2] Sector Expectations - The Tech and Finance sectors are the only ones with modestly rising earnings estimates for Q3 [4] - The Transportation, Energy, Business Services, and Aerospace sectors have seen the largest declines in earnings estimates [4] - For 2024, S&P 500 earnings are expected to grow +8% YoY, improving to +9.7% excluding the Energy sector [5] Construction Sector Outlook - Lennar is expected to report Q3 earnings of $3.62 per share on$9.29 billion in revenues, representing a -7.4% YoY decline in earnings and +6.4% revenue growth [6] - The Zacks Construction sector is expected to see Q3 earnings decline by -3% on +3.7% revenue growth, following +5.6% earnings growth in the previous quarter [8] - Full-year 2024 earnings for the Construction sector are expected to grow +1.1% YoY on +4.6% revenue growth, recovering from a -6.5% decline in 2023 [8] Broader Market Trends - Earnings growth for the S&P 500 is expected to accelerate in the coming periods, with double-digit gains projected for 2025 and 2026 [5] - The Construction sector's profitability has bottomed, with growth expected to resume from 2024 onwards [9]