US Stocks: Review of Financial Reports for October, December 2024
2025-03-11
■ Recent financial reports have performed well, but the uncertainty of profit prospects still exists
■ If the tax reduction bill makes progress and the profit expectations of domestic companies in the United States improve, the upward trend of the stock market may continue
As of last weekend, 491 companies in the S&P 500 index have released their financial reports for the period of October to December last year. According to financial information company LSEG I/B/E/S, 74% of companies reported earnings per share (EPS) that exceeded market expectations. It is expected that EPS will increase by 17.0% year-on-year (actual data for companies that have been announced, market forecast for companies that have not been announced), far exceeding the market forecast of 9.6% growth in early January this year. The overall financial performance can be considered relatively good. From an industry perspective, the EPS growth rates of industries such as finance (17.4% → 35.1%), communication services (CS, 22.6% → 31.5%), and general consumer goods (13.0% → 27.2%) all exceeded market expectations, and the information technology (IT, 15.4% → 19.8%) industry also performed steadily.
The future EPS growth is expected to exceed 10% every quarter after January, March 2024 (8.0%), and the overall growth rate is expected to be 10.7% in 2025, maintaining a steady growth level. However, compared to the expected 14.0% growth in early January, there has been a downward trend. The main driving forces for growth come from the healthcare, capital and finance industries, as well as the communication services (CS) and information technology (IT) industries where semiconductor and high-tech giants are located, driven by the growing demand for artificial intelligence (AI). This round of financial reports indicates that AI-related demand remains strong, and the outlook for future performance growth remains stable. However, there has been a stock price adjustment in the market, indicating that the market's profit growth expectations for semiconductor and high-tech giants are gradually catching up with actual performance. In addition, the recent performance of retail companies has also been stable, but due to rising costs leading to a slowdown in revenue growth and signs of slowing personal consumption expenditure, companies are becoming more cautious in sales forecasts. At the same time, the impact of the US government's tariff increase is also beginning to emerge.
Although the expected price-to-earnings ratio (PER) has dropped to around 21 times, it is still in the overvalued range. Given the increased market uncertainty caused by the US government's tariff policies, the short-term decline in PER may exert downward pressure on stock prices. During the first Trump administration, the tax cuts passed at the end of 2017 significantly increased EPS in 2018. In this cycle, the market also expects similar policy push, but it is expected that the bill review in Congress will be very difficult, and the legislative process may take a long time. In addition, even if the bill is passed, it is expected that its content will mainly be the permanent or extension of the first government's tax reduction policy, and the additional tax reduction efforts will be limited, so the boost effect on EPS may not reach the level of the last time. However, suppose the US government's policies can promote the return of manufacturing and maintain a stable growth trend in EPS for domestic companies. In that case, the upward trend in the stock market is expected to continue in the medium to long term.
■ If the tax reduction bill makes progress and the profit expectations of domestic companies in the United States improve, the upward trend of the stock market may continue
As of last weekend, 491 companies in the S&P 500 index have released their financial reports for the period of October to December last year. According to financial information company LSEG I/B/E/S, 74% of companies reported earnings per share (EPS) that exceeded market expectations. It is expected that EPS will increase by 17.0% year-on-year (actual data for companies that have been announced, market forecast for companies that have not been announced), far exceeding the market forecast of 9.6% growth in early January this year. The overall financial performance can be considered relatively good. From an industry perspective, the EPS growth rates of industries such as finance (17.4% → 35.1%), communication services (CS, 22.6% → 31.5%), and general consumer goods (13.0% → 27.2%) all exceeded market expectations, and the information technology (IT, 15.4% → 19.8%) industry also performed steadily.
The future EPS growth is expected to exceed 10% every quarter after January, March 2024 (8.0%), and the overall growth rate is expected to be 10.7% in 2025, maintaining a steady growth level. However, compared to the expected 14.0% growth in early January, there has been a downward trend. The main driving forces for growth come from the healthcare, capital and finance industries, as well as the communication services (CS) and information technology (IT) industries where semiconductor and high-tech giants are located, driven by the growing demand for artificial intelligence (AI). This round of financial reports indicates that AI-related demand remains strong, and the outlook for future performance growth remains stable. However, there has been a stock price adjustment in the market, indicating that the market's profit growth expectations for semiconductor and high-tech giants are gradually catching up with actual performance. In addition, the recent performance of retail companies has also been stable, but due to rising costs leading to a slowdown in revenue growth and signs of slowing personal consumption expenditure, companies are becoming more cautious in sales forecasts. At the same time, the impact of the US government's tariff increase is also beginning to emerge.
Although the expected price-to-earnings ratio (PER) has dropped to around 21 times, it is still in the overvalued range. Given the increased market uncertainty caused by the US government's tariff policies, the short-term decline in PER may exert downward pressure on stock prices. During the first Trump administration, the tax cuts passed at the end of 2017 significantly increased EPS in 2018. In this cycle, the market also expects similar policy push, but it is expected that the bill review in Congress will be very difficult, and the legislative process may take a long time. In addition, even if the bill is passed, it is expected that its content will mainly be the permanent or extension of the first government's tax reduction policy, and the additional tax reduction efforts will be limited, so the boost effect on EPS may not reach the level of the last time. However, suppose the US government's policies can promote the return of manufacturing and maintain a stable growth trend in EPS for domestic companies. In that case, the upward trend in the stock market is expected to continue in the medium to long term.