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S&P 500 rockets to new highs as earnings beat estimates

People silhouettes on American stock market index S P 500 - SPX.

Key Points

  • A diverse group of S&P companies, including Uber, CVS, ConocoPhillips, Hershey and Disney, exceed analysts' earnings views in recent days, boosting investor confidence.
  • Technology stocks, including Microsoft, Apple, Qualcomm and Intel, contributed significantly to the overall index earnings increase.
  • Market sentiment is bullish sentiment with the SUP up 3.2% since January 19, but the index's forward P/E indicates prices may be getting frothy.
  • 5 stocks we like better than Alphabet

Better-than-expected earnings growth is sending the S&P 500 to new highs. The uptick is driven by a diverse group of companies including Uber Technologies Inc.  NYSE: UBER, CVS Health Corp. NYSE: CVS, ConocoPhillips NYSE: COPHershey Company Inc. NYSE: HSY and Walt Disney Co. NYSE: DIS, all beating analysts’ earnings views. 

The latest earnings reports from S&P 500 companies, as a group, have surpassed expectations. The SPDR S&P 500 ETF Trust NYSEARCA: SPY

According to research from data analysis firm FactSet, there’s been a marked improvement in S&P 500 earnings per share since January 19. 

“The main reason for the improvement in earnings is that more companies have beaten EPS estimates and by a wider margin after January 19 compared to before January 19,” wrote FactSet’s John Butters.

He added that through January 19, in aggregate, S&P 500 companies had reported actual earnings that were 17.8% below estimated earnings. 

Big financials missed EPS views

Financials, which are typically among the earliest companies to report fourth-quarter results, “accounted for accounted for most of this below-average performance relative to estimates,” Butters wrote.

For example, JPMorgan Chase earnings reveal the financial giant missed earnings forecasts by 69 cents a share. The stock has rallied since its January 12 report.


Wells Fargo & Co. NYSE: WFC earnings missed views by 86 cents per share. Wells Fargo stock has chopped around since its January 12 report, and is trading slightly higher in the weeks since.

On the positive side, insurance giant Chubb Ltd. NYSE: CB was among S&P financial stocks reporting a positive earnings surprise. Because it hails from an unglamorous corner of the financial sector, Chubb doesn’t get much attention, but the stock is up 8.43% in the past month, outpacing the broader market. 

10 S&P sectors reporting positive results

Since FactSet’s earnings calculations on January 19, more companies representing the other 10 S&P sectors have reported quarterly results. With those new results in, the index's performance relative to estimates has improved. 

Between January 19 and February 5, according to FactSet, 75% of S&P 500 companies have reported actual EPS above estimates. In aggregate, S&P 500 companies have reported actual earnings that exceeded estimates by 7.3%.

“As a result, ten of the eleven sectors now have higher earnings growth rates (or smaller earnings declines) today compared to January 19, led by the Information Technology, Energy, Health Care, and Consumer Discretionary sectors,” according to FactSet. 

Technology stocks contributed the most to the increase in earnings, with positive earnings surprises coming from tech titans including Microsoft Corp. NASDAQ: MSFT, Apple Inc. NASDAQ: AAPL, Qualcomm NASDAQ: QCOM and Intel Corp. NASDAQ: INTC.

Energy, healthcare, and consumer stocks beating EPS forecasts

Among energy stocks, companies with positive earnings surprises included Exxon Mobil Corp. NYSE: XOM, Marathon Petroleum Corp. NYSE: MPC and  Chevron Corp. NYSE: CVX.  

The healthcare sector is the third-largest contributor to this increase in earnings, accounting for about $2.4 billion of the net increase in earnings of $16.0 billion, according to FactSet. 

Pfizer Inc. NYSE: PFE continues to lag the Health Care Select Sector SPDR Fund NYSEARCA: XLV and the broader S&P 500, but it did manage to beat earnings views by a good margin when it reported on January 30.  

When it comes to consumer discretionary stocks, Amazon.com Inc. earnings NASDAQ: AMZN topped analysts’ views by 19 cents a share, a significant contributor to the overall S&P earnings increase. 

From the communications services sector, Meta Platforms Inc. NASDAQ: META and Alphabet Inc. NASDAQ: GOOGL exceeded analysts’ earnings forecasts for the fourth quarter. Because they’re so heavily weighted in the S&P 500, they were significant contributors to the index’s total increase in earnings since January 19. 

Market sentiment bullish, but use caution

The surge in earnings across the S&P 500 has not only defied earlier forecasts but also sparked a wave of bullish sentiment among investors, with the SPDR S&P 500 ETF Trust NYSEARCA: SPY up 3.2% since the close on January 19. 

Although analysts are forecasting strong earnings growth for many S&P companies, keep in mind that cost cuts, the polite term for layoffs, have been responsible for some of the earnings growth. You’d prefer to see revenue increases as the key driver, which it still is, in many cases.

Also, the S&P has run up 21.81% in the past year. There may be some more room to run, but it’s typical to see a pullback after a rally of 20% to 25%.

Overvaluation may become an issue in the not-so-distant future: According to Yardeni Research, the forward price-to-earnings ratio of the S&P 500 is 20.4. That doesn’t mean a correction will happen tomorrow, but it’s something for investors to keep an eye on, even as earnings growth remains strong.  

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Alphabet (GOOGL)
3.0233 of 5 stars
$176.40+0.8%N/A27.06Moderate Buy$191.57
Amazon.com (AMZN)
4.6974 of 5 stars
$182.15+0.8%N/A51.02Buy$211.62
Apple (AAPL)
4.6028 of 5 stars
$189.99+0.0%0.53%29.55Moderate Buy$205.44
Chevron (CVX)
4.577 of 5 stars
$159.04+0.8%4.10%14.63Moderate Buy$186.10
Chubb (CB)
4.8234 of 5 stars
$262.64-0.8%1.31%11.66Moderate Buy$266.70
ConocoPhillips (COP)
4.7451 of 5 stars
$118.96+1.5%1.95%13.47Moderate Buy$143.24
Exxon Mobil (XOM)
4.7935 of 5 stars
$114.86+1.3%3.31%14.08Moderate Buy$135.00
Health Care Select Sector SPDR Fund (XLV)N/A$142.67-1.2%1.39%23.82N/AN/A
Intel (INTC)
4.9648 of 5 stars
$31.06+1.1%1.61%32.35Hold$39.58
JPMorgan Chase & Co. (JPM)
4.4956 of 5 stars
$199.50-0.6%2.31%12.05Moderate Buy$194.10
Marathon Petroleum (MPC)
3.5085 of 5 stars
$179.16+0.8%1.84%8.95Moderate Buy$190.77
Microsoft (MSFT)
4.7804 of 5 stars
$430.32+0.0%0.70%37.26Moderate Buy$454.70
Pfizer (PFE)
4.8446 of 5 stars
$28.30-2.0%5.94%-471.59Hold$35.86
Hershey (HSY)
3.7574 of 5 stars
$197.61+0.3%2.77%19.58Hold$213.06
Walt Disney (DIS)
4.7431 of 5 stars
$102.44+0.7%0.29%111.35Moderate Buy$126.29
Uber Technologies (UBER)
4.9311 of 5 stars
$63.52-1.2%N/A102.45Moderate Buy$84.38
Wells Fargo & Company (WFC)
4.1924 of 5 stars
$59.48-1.2%2.35%12.42Hold$58.99
CVS Health (CVS)
5 of 5 stars
$53.63-3.4%4.96%9.43Moderate Buy$76.75
SPDR S&P 500 ETF Trust (SPY)N/A$529.81+0.1%1.27%N/AN/AN/A
Meta Platforms (META)
3.3506 of 5 stars
$479.92+0.4%0.42%27.57Moderate Buy$509.80
Health Care Select Sector SPDR Fund (XLV)N/A$142.67-1.2%1.39%23.82N/AN/A
Compare These Stocks  Add These Stocks to My Watchlist 

Kate Stalter

About Kate Stalter

  • stalterkate@gmail.com

Contributing Author

Retirement, Asset Allocation, and Tax Strategies

Experience

Kate Stalter has been a contributing writer for MarketBeat since 2021.

Additional Experience

Series 65-licensed investment advisor, financial advisor, Blue Marlin Advisors; investment columnist for Forbes, U.S. News & World Report

Areas of Expertise

Asset allocation, technical and fundamental analysis, retirement strategies, income generation, risk management, sector and industry analysis

Education

Bachelor of Arts, Saint Mary’s College, Notre Dame, Indiana; Master of Business Adminstration, Kellogg School of Management at Northwestern University

Past Experience

Founder, financial advisor for Better Money Decisions; editor, stock trading instructor for Investor’s Business Daily; columnist, podcast host, video host for MoneyShow.com; contributor for Morningstar magazine


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