Where is 2014 Earnings Growth Coming From?

As we slowly creep into the final trimester of 2013, investors are likely to start looking forward to what 2014 will bring.  When portfolio managers plug 2014 estimates into their models, they should be happy to notice that analysts are still looking for fairly robust growth in earnings next year.  Analysts are estimating $122 “per share” in S&P 500 earnings for 2014, which is 11% growth from the $110 they are expecting for 2013.  These numbers imply that the S&P 500 is trading for 13.5x 2014 numbers, which is plenty cheap (if you believe in the growth).

In order to get a better sense of where the analysts are expecting this growth to come from, below is the aggregated earnings data for the S&P 500 by sector.  Rather than look at it on an index basis, I’ve summed the actual dollar figures for the individual components of the $SPX.  The companies of the S&P 500 are expected to earn $1.15 Trillion in 2014, which is $113 Billion more than in 2013.  $23 Billion (20%) of that growth is expected to come from the Tech sector, $19 B (17%) from Consumer Discretionary and $15 B (14%) from Financials.

The top three contributors to each sector are also listed on the table.  For Technology, AAPL, GOOG and MSFT are expected to grow earnings by $7.9 B combined, which is 34% of Technology’s total growth contribution.  The largest concentration of earnings growth is in the Financial sector, where BAC, C and MS are expected to combine for 42% of the sector’s growth.  In fact BAC is expected to have the most earnings growth of any company on the S&P 500 in 2014, with earnings besting the 2013 number by $3.8 B.

2014 Projected Earnings Growth By Sector


Source: Compustat Data

2 thoughts on “Where is 2014 Earnings Growth Coming From?

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