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The US EPS growth outlook – is the glass half full or empty?

May 29, 2023
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As we approach the middle of the year increasing attention is given to the EPS outlook beyond year end 2023

When we gauge the US corporate EPS pulse there are signs of improvement but also caveats around the quality of the recovery.  

Glass half full: A big recovery in 2024 EPS growth is projected

Exhibit 1 shows the latest consensus 2023 and 2024 EPS growth rate projections across the regions. It also shows where these projections stood at the start of the year (dots). The US 2023 EPS growth forecasts have deteriorated and now stand at3.4%.

Is this the nadir? On a positive tack however, the 2024 EPS growth forecasts have improved and now stand at 13.4%.

We also show in Exhibit 3 following the latest Q1 EPS releases the 2023 and 2024 EPS estimate shave seen their first uptick in over a year.

Exhibit 1: The status of consensus regional EPS growth forecasts

Source: Wilshire and FactSet. Data as of May 17, 2023.

What sectors are contributing to the 2024 recovery outlook?

Exhibit 2 shows the 2023 and 2024 consensus top 10 US sector EPS growth rate projections. It also shows the sector weighted contributions that determine the aggregate level. Looking at the 2024 total market EPS growth rate projection of 13.4% ,3.4% of that growth (c.25%) is accounted for by contribution from the technology sector. However, as this is a similar sized contribution to that of 2023 the technology sector is not the main driver behind the 2024 improvement.

We highlight the financials, consumer durables, electronic technology, energy, and health technology sectors as the primary contributors to the improved outlook.

Exhibit 2: US top 10 sector 2023 & 2024 EPS growth rates and contributions.


Source: Wilshire and FactSet. Data as of May 17, 2023.


Glass half empty: The improvement is purely a function of 2024 estimates being revised down at a slower rate compared to 2023

The EPS growth rate compares the EPS from one period against another. This is why when gauging the quality of the growth rate projections it is important to analyze the profile of the underlying EPS forecasts. Exhibit 3 shows the estimate trails for aggregate US consensus forecasts for 2023 and 2024.It shows that both series or estimates have declined from the start of the year ( 2023 by-6.5% and 2024 by -3.1%). This implies the improvement in the 2024 growth forecast (the gap between the two lines) has not been high quality as it is a function of the denominator series deteriorating at a faster rate.

Exhibit 3: The US 2023 and 2024 EPS estimate trails

 Source: Wilshire and FactSet. Data as of May 17, 2023.


MM-388328 E0623



Philip Lawlor

Managing Director,  Market Research (Benchmarks)

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