2024 EPS growth forecasts: So far so good, but optimism is starting to erode

2023 was a disappointing year in terms of EPS growth.US equities only delivered +2.3% growth while the World ex US saw a decline of -4.2%.

The good news is that consensus forecasts point to a strong recovery in 2024 with the US and World ex US forecasts to deliver +12.3% and +11.6% respectively (see table below).

However, the one caveat is that the growth forecasts have started to nudge lower.

Exhibit 1: Regional consensus 2024 EPS growth forecasts

US 2024 EPS growth rate revisions are tracing last year’s negative revision profile

In Exhibit 2, we compare the trajectory of US 2023 consensus EPS growth forecasts (blue line line) v the trajectory of 2024 EPS forecasts (black line). Although this year’s forecasts are starting from a higher base, we seem to be seeing a similar profile to last year with analysts ratcheting growth rates lower as the year progresses.

Exhibit 2: US 2024 EPS forecasts revisions are retracing the 2023 profile

More than half of the US 2024 EPS growth is dependent on the contribution from the tech sectors

In Exhibit 3 we show that the US tech sectors are forecast to contribute 6.6% of the total market growth rate of 12.3% (more than half). By contrast the World ex US has less dependency on the contribution from the tech sectors. This skew is both a positive but also a risk for the US market especially if the tech sectors experience negative revisions in Q3 & Q4.

Exhibit 3: Sector EPS growth contributions

Source: Wilshire Indexes and FactSet. Data as of May 20, 2024.

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