As last year came to a close, earnings per share growth for companies in the S&P 500 Index (^SPX) for the third quarter (Q3) was projected at 12.7%. But as of Sept. 30, the forecast is 6.9%, which is five percentage points below the average year-over-year increase since 2009, notes Sam Stovall, chief investment strategist at CFRA Research.
Still, over these nearly 17 years, actual EPS growth exceeded end-of-quarter forecasts in 64 out of 66 quarters. In short, despite the change in Q3 EPS growth projections, CFRA thinks management has done another good job of managing expectations.
(Editor’s Note: Sam will be speaking at the 2025 MoneyShow Masters Symposium Sarasota, scheduled for Dec. 1-3. Click HERE to register.)
The S&P 500’s expected 6.9% Q3 EPS increase should be driven mainly by a 19.2% gain in the S&P 500 Growth index, along with a 20.2% increase for the Information Technology sector.
Above-market growth should also be seen in the Financials, Industrials, and Utilities sectors. Areas likely to deliver the deepest declines include the S&P 500 Value Index, along with the Consumer Discretionary, Consumer Staples, Energy, Health Care, and Real Estate sectors.
Finally, at the sub-industry level, aerospace and defense, fertilizer and agricultural chemicals, and leisure facilities are seen recording the highest Q3 gains. Coal and consumable fuels, commodity chemicals, and forest products post the deepest declines.
For full-year 2025, the S&P 500 EPS is now expected to rise 8.7% YOY, followed by a 13.6% increase in 2026. Full-year 2025/2026 gains for the S&P MidCap 400 and S&P SmallCap 600 are seen at +2.9%/+18.1% and +8.2%/+19.1%, respectively. Finally, the S&P 500’s P/E on forward 12-month EPS stands at 23.9x, a 24% premium to its 10-year average.
