S&P 500 Q3 earnings growth expectations have risen by three percentage points heading into earnings season, a notable shift from the usual pattern of downward revisions. At the sector level, Energy and Technology have seen the largest upward revisions, while Materials has experienced the sharpest cuts.
We observe a strong positive correlation between changes in Q3 earnings growth expectations and aggregate sector-level StarMine Analyst Revision Model (ARM) scores. Sectors seeing higher (lower) revisions generally exhibit more bullish (bearish) analyst sentiment.
Upward earnings revisions may already be partly priced in for Energy and Technology, with sector prices up 24% and 11%, respectively, since July. Elsewhere, prices and revisions have diverged: Industrials fell 8% despite modest upgrades, Healthcare gained 7% despite downgrades, and Materials declined just 2% despite an 11.5-percentage-point cut to growth expectations.
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