UBS_Equities-US_Equity_Strategy_1Q25_Earnings_Brief_May_08_Simonds-115281908_21页_1mb

US Equity Strategy Summary

Core Content

This document provides an analysis of the S&P 500 earnings performance for the first quarter of 2025 (1Q25), highlighting the expected and actual earnings outcomes across various sectors and companies. It outlines the impact of different sectors on the overall earnings growth and includes insights on price action, surprises, and valuation metrics.

Main Points

Earnings Performance Overview

• 84.8% of the S&P 500's market cap has reported earnings so far.
• 1Q25 earnings are beating estimates by 8.4% in aggregate, with 71% of companies surpassing projections.
• The expected EPS growth for the S&P 500 is 10.3%, slightly above the current estimate of 10.1%.

Sector-Wise EPS Growth

• TECH+ is expected to outperform with 27.4% YoY EPS growth, significantly higher than the market average.
• The Big 6 TECH+ companies are expected to grow 31.7%, compared to 4.5% for the rest of the market.
• Financials are expected to grow 6.7%.
• Non-Cycicals are expected to grow 4.3%.
• Cyclicals ex-Energy are expected to grow 0.8%.
• Energy is expected to decline by -16.8%.

Margin and Sales Impact

• Cyclical ex-Energy margins are expected to contract by -2.3%, slightly worse than Non-Cycicals at -2.0%.
• Non-Cycicals sales are expected to grow 5.7%, largely offsetting the margin contraction.
• Health Care and Utilities are leading the sales growth with +9.2% and +10.5% respectively.

Upcoming Earnings Reports

• 29 companies representing 2.1% of the S&P 500's market cap are scheduled to report results over the next 5 trading days.
• Notable companies include Microchip Technology, Warner Bros. Discovery, NRG Energy, Fox, Copart, and Cisco Systems.

Key Information

Earnings Surprises

• TECH+ companies have shown the highest earnings surprises, with 14.2%.
• S&P 500 earnings surprises are 8.4%, with 71% of companies beating estimates.
• Utilities have the highest revenue surprise at 5.4%, while Health Care has the highest earnings surprise at 9.2%.

Price Action

• The S&P 500 has a -0.9% overall price performance.
• TECH+ has a -0.4% price performance.
• Non-Cycicals have a -1.0% price performance.
• Energy has the worst price performance at -3.2%.

Valuation Metrics

• TECH+ has had an outsized impact on S&P 500 EPS growth over the past year.
• Energy is expected to be a significant drag on the overall EPS growth.
• S&P 500 is still expected to grow at 8.0% for 2025 based on consensus estimates.

Additional Notes

• The Quantitative Research Review provides insights into short-term factors and is a separate assessment from the 12-month equity ratings.
• FSR (Forecast Stock Return) is defined as the expected percentage price appreciation plus the gross dividend yield over the next 12 months.
• MRA (Market Return Assumption) is the one-year local market interest rate plus 5% as a proxy for the equity risk premium.
• Short-Term Ratings reflect expected near-term performance (up to 3 months) and are not based on fundamental changes.

Equity Strategy Team

• Sean Simonds – Strategist, UBS
• Maxwell Grinacoff, CFA – Strategist, UBS
• Andrew Garthwaite – Strategist, UBS
• Gerry Fowler – Strategist, UBS

Disclaimer

• Equity market returns are influenced by corporate earnings, interest rates, risk premia, and other business cycle-related variables.
• The information and data are based on company disclosures and past performance, which is not a reliable indicator of future results.
• UBS Securities LLC is an affiliate of UBS AG, and the report includes disclosures about conflicts of interest and third-party data usage.
• For detailed disclosures, please visit https://www.ubs.com/disclosures.