February Review: Europe rises

Horacio Coutino, multi-asset strategist

Q4 Earnings in focus

As the Q4 earnings season reaches its final phase, 480 of the 503 components of the S&P 500 index have reported earnings as of 28^th February, 2025. The S&P 500 is showing a strong performance thus far. The percentage of companies exceeding earnings expectations, and the magnitude of these surprises, is above their 10-year averages. Additionally, the index is reporting its highest year-over-year earnings growth rate for a fourth quarter in three years.

Beyond the robust earnings season, market attention has shifted toward the sustainability of capital expenditures in AI infrastructure, particularly in light of DeepSeek’s model and the potential for widespread adoption. While US yields have remained elevated, they have not posed a significant headwind for sectors positioned to benefit from the policy initiatives of the new US administration.

Data compiled by LSEG I/B/E/S as of 28^th February, 2025, indicate that 480 or 92.6% of S&P 503 constituents have reported Q4 results. Of those reporting, 74.0% exceeded EPS estimates, surpassing both the long-term average (since 1994) of 67.0%, but below the prior four quarter average of 77.7%.

The increase in the index's overall earnings growth rate since 31^st December can be primarily attributed to positive EPS surprises reported by companies in the Financials, Consumer Discretionary, and Communication Services sectors, being partially offset by the Energy sector’s performance, with the weakest anticipated growth compared to Q3 2024.

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