As the second half of 2024 begins, market participants are reassessing their earnings growth expectations not only for this year but for 2025 as well.
Wall Street analysts expect S&P 500 companies to see strong earnings per share growth of 14.5% in 2025.
According to analysts at Yardeni Research, this would represent an impressive follow-up to the 10.6% growth expected for this year.
“We expect S&P 500 earnings per share to grow 12.1% this year and 8.0% in 2025,” the financial research firm said in a recent report.
The scope of earnings growth next year is also noteworthy. Analysts expect all 11 sectors in the S&P 500 to see earnings growth, along with all but 7 of the 135 industries in the S&P 500.
That broad-based growth has been a powerful driver of the S&P 500’s forward earnings, which are the time-weighted average of consensus estimates of operating earnings per share for the current year and the next. Yardeni notes that this earnings power is supporting the S&P 500’s 14.5% year-to-date gain through Friday’s close.
By sector, the IT sector is expected to lead the S&P 500’s expected earnings growth, expanding 20.2% in 2025 and 19.3% in 2024.
The healthcare sector is expected to grow by 18.4% in 2025 and 8.4% in 2024, while the materials sector is expected to grow by 17.4% in 2025 after declining by 2.2% in 2024. The industrial sector is expected to grow by 15.2% in 2025 and 5.7% in 2024.
Yardeni noted that the S&P 500 index overall is expected to grow 14.5% in 2025 and 10.6% in 2024.
The real estate sector is expected to witness the slowest growth of 7.7% and 0.7% in 2025 and 2024, respectively.
It’s worth noting that Yardeni also said that many industries with some of the strongest projected growth in 2025 may be flying under investors’ radar because they are expected to have little earnings growth this year.
For example, Interactive Home Entertainment, which tops the 2025 earnings growth chart with a projected increase of 46.5% in 2025 and 5.5% in 2024, falls into this category.
Other industries expected to see sharp earnings growth improvements in 2025 from lows this year include copper (39.6% in 2025, 7.1% in 2024), paper and plastic packaging products (24.7% in 2025, -5.2% in 2024), personal care products (23.0% in 2025, -17.2% in 2024), passenger airlines (20.3% in 2025, -3.9% in 2024), and others.
Furthermore, analysts at Yardeni highlighted strong earnings growth forecasts for the industries that comprise MegaCap-8 stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Netflix, Nvidia, and Tesla — which are expected to range from 8.9% to 46.5% in 2025.
The S&P 500 semiconductor industry, led by Nvidia, is expected to see the highest growth at 38.8%.
Alphabet and Meta, part of the Interactive Media and Services industry, are expected to see their earnings grow from 40.1% in 2023 to 32.1% in 2024 and 13.9% in 2025.
Amazon, which dominates the retail sector of the S&P 500, is expected to post earnings growth of 52.6% in 2024 and 25.8% in 2025.
Netflix, part of the S&P 500’s film and entertainment sector, is expected to see its earnings rise 27.3% in 2025, after huge jumps of 65.9% in 2024 and 294.9% in 2023.
Apple, part of the S&P 500 Technology, Storage and Peripherals industry, is expected to recover with earnings growth of 8.8% in 2024 and 14.2% in 2025, after declining in 2023.
The software systems segment, which includes Microsoft and Oracle, is expected to see earnings growth slow from 19.5% in 2024 to 12.9% in 2025.
Finally, Tesla, in the S&P 500 automakers sector, is expected to see a modest earnings increase of 8.9% in 2025, after lower growth rates of 2.8% in 2024 and a decline of 7.4% in 2023.
