Which S&P 500 sectors – from an earnings perspective – are poised for a healthy 2025?

Despite the Mag 7 price action, forward estimates in the tech sector are still rising.

Looking at the estimated revenue growth for the full year 2024 and 2025, see how the estimated growth rates of the technology sector are trending:

• The expected earnings of the technology sector for 2024 growth is up about 300 bps, or 3%, since early April ’24.
• Estimated tech earnings growth for 2025 has increased by about 200 bps since the start of the 24th.

For those looking for a head start in what sectors could to outperform in ’25 based on sector earnings growth, see calendar 2025 table for sectors with expected growth rising as of April ’24. Here is a list of sectors.

• Energy sector growth for ’25 up over 400 bps since early April ’24;
• Healthcare growth for ’25 increased by over 700-800 bps since early April ’24 (Healthcare growth in ’24 it’s been halved in the last 6 months, so don’t ignore it);
• Industrial sector growth for ’25 rose 120 bps since early April ’24;
• Basic materials sector growth for ’25 increased by around 250-300 bps since early April ’24;
• Communications services sector growth up 290 bps YTD;
• Estimated earnings growth in the tech sector has increased by about 200 bps since the start of ’24;
• Estimated utility sector growth is up about 100 bps since early ’24;

Here’s an insight rarely talked about in the mainstream financial media: Which sectors are looking for the biggest changes in absolute revenue growth for 2025 (vs. what’s expected in 2024):

• Energy is taking the prize right now: As of this week, 2024 is expected to decline 11% year-over-year, versus an estimated 14% growth rate for ’25;
• Consumer discretionary and consumer staples look for similar (ie, flatter) growth rates in ’25 seen in ’24;
• The industry expects much faster growth in ’25 (+16%) than in ’24 (+3%).
• Healthcare is also expected to grow much faster in ’25 (+21%) than in ’24 (+6%);
• Basic materials also with +18% expected in ’25 vs. -3% in ’24.

Expected tech growth for ’25 as of today, while seeing positive revisions, almost expects a growth rate in ’25 (+21%) that’s not all that different from ’24, +19%.

The above sentence could be why Mag 7 and tech stocks have fallen sharply over the past 8 weeks. While sector estimates are rising, the absolute change in 2025 projected tech sector earnings growth is about the same growth rate as seen in ’24.

Looking at the industrial, energy and basic materials sectors, the expected growth rates in ’25 show that America’s industrial economy is poised for healthy growth in ’25. These sectors account for about 25% of the S&P 500’s market capitalization, with the industrials sector accounting for half the market capitalization share of the three at 12%.

Summary / conclusion

This article had a completely different title and goal at first, but the title was changed after you wrote this piece, which is exactly why you want to have a blog or do a podcast, that is, so that you expose or articulate the process of forward thinking. drawing the conclusion.

While the purpose of today’s blog was to talk about further bullish earnings estimates in the tech sector, the article has expanded to include all sectors in the S&P 500 that see bullish sector growth (ie, positive revisions) in 2025, which it is a somewhat unusual model.

Also of note was identifying the sectors that will see the largest absolute changes in expected growth in calendar 2025 (based on today’s estimates) versus 2024, so readers can see the sectors with the largest possible growth changes for 2025 .

Next, this blog will appear with “Top 10 holdings” for clients and what changes have been made to the portfolio. Investment advisers, fund managers and people who manage their own money should already be thinking about what 2025 has in store for them.

There’s a lot that can go right and wrong: stocks go up for a number of reasons, namely, P/E expansion, easier monetary policy (ie, lower interest rates that generate lower discount rates), tax favors (ie , pro-business) and economic (fiscal) policies, favorable demographics and vice versa.

So far, 2025 is looking positive from the perspective of “anticipated 2025 S&P 500 EPS growth.” S&P 500 EPS growth looks healthy, and with a possibly easier Federal Reserve and a lower fed funds rate, you’d think interest rate-sensitive sectors would outperform. That being said, what other sectors do you want to overweight and what sectors do you want to avoid?

None of this is advice or recommendation, just an opinion. Past performance is no guarantee of future results. Investing can and does involve the loss of principal even for short periods of time. Readers should assess their own comfort level with portfolio volatility and adjust accordingly.

Thanks for reading.

Original post

Editor’s note: The abstracts for this article were chosen by the editors of Seeking Alpha.