UBS Equities-US Equity Strategy _1Q25 Earnings Season Preview_ Simonds-114627471

ab10 April 2025Global ResearchUS Equity Strategy1Q25 Earnings Season Preview1Q EPS Likely Grew 7.4% y/y, Margins close to flat insulated by Tech+S&P 500 EPS is forecasted to have grown 3.8% in 1Q. While this appears slower than the past 4 quarters, this number does not incorporate likely surprises. Historical trends imply that growth should finish closer to 7.4% (for Q1 y/y). 4Q followed a similar pattern, finishing at 14.3%, despite initial forecasts of only 8.4%.S&P 500 Earnings Revisions in-line with Historical Trend for Q1 and Full Year '25This earnings season, we think revisions could follow the normal pattern: they start too high, are adjusted lower heading into reporting season, and could come in slightly higher vs. expected. Year-to-date 1Q earnings for the S&P 500 have been revised down -4.4%, in-line with the revision path for Q1 earnings since 2011. However, full year 2025 revisions are above where we would have expected based on the historical trend, down only -3.8% vs -4.1%. In this note we include S&P 500 sector revision paths for full year 2025 against their respective historical trend, as well.Beats Incrementally Softer for Early ReportersEarly reporters – 21 companies with off-cycle quarter ends – topped 1Q EPS estimates by 4.8%, just below the long-term average of 4.9%, though slightly weaker than recent quarters (2Q: 5.5%, 3Q: 6.3%, 4Q: 6.6%). Sector Observations: TECH+, Energy
TECH+ continues to be the fastest growing group, with EPS expected to rise 16.4% (vs. -1.6% for non-Tech related companies). While the Big 6 TECH+ are still expected to outgrow the rest of the group, consensus company forecasts are varied (MSFT: 9.6%, AAPL: 5.5%, META: 13.3%, GOOG: 6.8%, AMZN: 39.0%, NVDA: 51.6%).
Energy is an outlier to the downside, with EPS expected to contract -15.7%. The group is projected to achieve 0.4% EPS growth for full year 2025.
Materials is expected to experience negative growth YoY in Q1 of -10.6% in EPS vs 2.9% increase in 4Q and -20.2% in prior year (1Q24).
Non-Cyclicals are expected to outperform Cyclicals ex-Energy in terms of the EPS growth, with projected EPS growth of 0.4% vs -3.9%. Cyclicals ex-Energy are brought down by Materials and Discretionary ex-Amazon. While both groups are seeing expected margin contractions of ~5-6%, Non-Cyclicals largely offset that with expected revenue growth of 4.9%.This report has been prepared by UBS Securities LLC. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 15. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.Equity StrategyAmericasSean SimondsStrategist sean.simonds@ubs.com +1-212-713 2851Maxwell Grinacoff, CFAStra