UBS: Big Tech To Set Tone ~ Earning season

Earnings season off to positive start, big tech to set tone

The earnings season has commenced on an auspicious note, with S&P 500 earnings per share (EPS) projected to expand by 10-12%, aligning seamlessly with UBS’s prognostications.

“Approximately 60% of companies are surpassing sales projections, and nearly 75% are exceeding EPS forecasts,” UBS stated in a communiqué on Monday. Nonetheless, they noted that the median EPS surpass of 2.5% is slightly below recent quarters, intimating a marginally diminished earnings momentum.

To date, only 14% of the S&P 500 market capitalization has divulged results. The banking and financial services sectors spearheaded this revelation, with outcomes generally aligning with or modestly surpassing expectations.

“Capital markets undertakings (equity issuance, mergers and acquisitions) and robust trading propelled revenue surpasses,” UBS analysts commented, further elucidating that while escalating deposit costs remain a burden, they are decelerating, portending a more favorable outlook for net interest income.

The bank underscores that consumer expenditure remains resilient, underpinned by a robust labor market and vigorous household balance sheets, despite persistent pressures on lower-income brackets. Banks seem to possess surplus capital but are deferring share buybacks, pending further regulatory clarity anticipated within six months.

AI advancements also furnished an uplift, UBS remarked, highlighting that Taiwan Semiconductor anticipates AI chip demand to outstrip supply until 2026, extending its prior estimate of 2025.

ASML (AS) similarly reported robust demand into 2025, and Blackstone (NYSE) CEO Stephen Schwarzman predicts AI-driven data center investments to reach USD 1 trillion in the United States and an additional USD 1 trillion globally over the ensuing five years.

UBS anticipates this upsurge to catalyze a 40% increasestocks

in US electricity demand over the next decade.

Looking forward, over 20% of the S&P 500 market cap is poised to report next week, including several eminent technology firms.

“This will likely set the tenor for the remainder of the earnings season,” UBS remarked. Despite a recent 3% retraction from its zenith, UBS remains sanguine, citing favorable market conditions and elevating their year-end S&P 500 price target to 5,900.

For 2024 and 2025, UBS forecasts S&P 500 EPS of USD 250 (+11% growth) and USD 270 (+8% growth), respectively.

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