ab24 January 2024Global Research and Evidence LabUS Equity StrategyEarnings Brief 4Q23: Jan 24Several Transportation names report this week including UNP, CSX, AAL, and LUV. EPS for the group is projected to fall -18.6% on softer freight volumes, higher labor costs, and weaker pricing power. This compares to much healthier trends for Capital Goods (+7.8%) and Business Services (+6.1%).4Q reporting season will be especially difficult for investors to navigate, given the wide dispersion in expected results. Revisions for the quarter are coming in weaker than the long-term trend: however, 2024 revisions are much stronger. While 4Q earnings should be quite mixed, the 2024 outlook is more broadly positive.16.0% of the S&P 500's market cap has reported. 4Q expectations are for revenues to grow 2.6% and EPS by 4.9%. Growth among groups varies significantly:GroupEPS Growth (%)TECH+33.3Financials9.5Non-Cyclical ex Health Care 5.4Industrials & Disc ex Internet Retail-0.9Health Care-15.5Energy & Materials-27.2Earnings are beating estimates by 5.8% in aggregate, with 78% of companies topping projections. EPS is on pace for 9.8%, assuming the current aggregate beat rate of 5.8% for the rest of this season.Over the next 5 trading days, 95 companies representing 27.3% of S&P 500’s market cap will report results, including Tesla, Visa, Intel, American Express, Pfizer, and Danaher. Figure 1: 4Q23 S&P 500 EPS Growth4.9-4.633.39.55.4-0.9-15.5-27.2%TECH+Non-Cyc ex-Health CareIndustrials & DiscretionaryHealth CareFinancialsEnergy & MaterialsS&P 500S&P 500 ex-TECH+Source: Standard & Poor’s, Refinitiv, FactSet, UBSThis report has been prepared by UBS Securities LLC. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 11. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.Equity StrategyAmericasJonathan GolubStrategist jonathan.golub@ubs.com +1-212-713 8673Patrick PalfreyStrategist patrick.palfrey@ubs.com +1-212-713-2000Will JacksonAssociate Strategist will.jackson@ubs.com +1-212-713-2000Nicholas SamoyednyAssociate Strategist nicholas.samoyedny@ubs.com +1-212-713-2000 US Equity Strategy 24 January 2024ab 2US Equity StrategyUBS ResearchS&P 500 Figure 2: 4Q23 Earnings Dashboard – S&P 500Weighted Growth YoY (%)RevenueMarginsEarningsBuybacksEPSS&P 5002.60.83.41.54.9Cyclicals-2.7-12.5-15.22.1-13.1Energy-9.4-21.9-31.32.9-28.5Materials-5.7-17.8-23.50.7-22.8Industrials2.3-3.0-0.81.40.6Discretionary ex-Internet Retail-0.5-4.3-4.81.7-3.2TECH+8.823.031.71.633.3Technology6.29.716.00.916.8Internet Retail11.2297.8309.1N.A.335.9Media & Internet14.384.698.92.9101.8Non-Cyclicals3.5-9.0-5.50.6-4.8Staples2.70.33.00.23.2He...
