ab26 January 2024Global Research and Evidence LabUS Equity StrategyEarnings Brief 4Q23: Jan 26Stock performance following surprises has been quite poor this earnings season. Companies beating on both sales and EPS are outperforming by 1.5% vs 1.7% historically, while those missing on both are underperforming by -5.7% vs. -3.1%. 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.26.5% of the S&P 500's market cap has reported. 4Q expectations are for revenues to grow 2.7% and EPS by 5.2%. Growth among groups varies significantly:GroupEPS Growth (%)TECH+34.1Financials9.2Non-Cyclical ex Health Care 5.2Industrials & Disc ex Internet Retail-0.3Health Care-15.6Energy & Materials-26.8Earnings are beating estimates by 5.3% in aggregate, with 74% of companies topping projections. EPS is on pace for 9.1%, assuming the current aggregate beat rate of 5.3% for the rest of this season.Over the next 5 trading days, 108 companies representing 38.3% of S&P 500’s market cap will report results, including Apple, Microsoft, Alphabet, Amazon, Meta, ExxonMobil, Mastercard, and Merck. Figure 1: S&P 500 Price Action%BeatsHits/MissesBeats1.5-0.10.7Hits/Misses0.1-5.7-1.80.7-0.8 EPS SurprisesRevenue SurprisesSource: Standard & Poor’s, Refinitiv, FactSet, UBSNote: Surprises based on revenue beat/miss by +/- 0.25%, earnings beat/miss by +/- 1%. Price performance -1 to +1 days. This 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 26 January 2024ab 2US Equity StrategyUBS ResearchS&P 500 Figure 2: 4Q23 Earnings Dashboard – S&P 500Weighted Growth YoY (%)RevenueMarginsEarningsBuybacksEPSS&P 5002.70.93.61.55.2Cyclicals-2.5-12.1-14.62.1-12.5Energy-9.5-21.5-31.02.9-28.1Materials-5.4-17.1-22.50.7-21.8Industrials2.5-2.10.41.41.8Discretionary ex-Internet Retail-0.2-4.9-5.11.6-3.4TECH+8.923.632.51.634.1Technology6.410.616.90.917.8Internet Retail11.3299.6310.9N.A.337.8Media & Internet14.383.898.12.9101.0Non-Cyclicals3.7-9.3-5.60.6-4...
