Google parent Alphabet (GOOG), Microsoft (MSFT), and Tesla (TSLA) are among the magnificent seven members that have delivered fourth-quarter results. The cadre of high-growth mega-caps will be pivotal drivers of S&P 500 EPS for the final three months of last year and beyond.
That implies upcoming earnings reports from the rest of the magnificent seven. And those delivered by the entire group over the course of 2024 will be big events for ETFs such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM).
Relative to S&P 500-tracking funds, those two ETFs are significantly overweight the magnificent seven. That group includes the aforementioned trio of stocks as well as Apple (AAPL), Meta Platforms (META), Amazon.com (AMZN) and semiconductor giant Nvidia (NVDA).
Magnificent Seven Earnings Could Power QQQ, QQQM
There are concerns about the level of concentration some large-cap equity ETFs possess in the magnificent seven. But hefty allocations to those stocks served QQQ/QQQM investors well last year. That could be the case again in 2024. That’s particularly so if these companies beat EPS forecasts. What’s not up for debate is that these seven juggernauts are expected to drive a major percentage of S&P 500 EPS for 2023 and perhaps 2024.
“Six of the seven companies in the ‘Magnificent 7’ are projected to be the top six positive contributors to year-over-year earnings for the S&P 500 for Q4 2023: NVIDIA, Amazon.com, Meta Platforms, Alphabet, Microsoft, and Apple. In aggregate, these six companies are expected to report year-over-year earnings growth of 53.7% for the fourth quarter,” noted FactSet’s John Butters. “Excluding these six companies, the blended (combines actual and estimated results) earnings decline for the remaining 494 companies in the S&P 500 would be -10.5% for Q4 2023. Overall, the blended earnings decline for the entire S&P 500 for Q4 2023 is -1.4%.”
Key Data Points for QQQ & QQQM Investors
Those data points take on added importance for QQQ and QQQM investors. That’s because Amazon.com, Apple, and Meta Platforms will deliver quarterly results in the coming days. As things stand today, Tesla is the only magnificent seven member that wasn’t a positive contributor to S&P 500 year-over-year EPS growth in 2023. But that could change for the better in 2024. Speaking of this year…
“It is interesting to note that four of these six companies are also projected to be the top four contributors to earnings growth for the S&P 500 for Q1 2024: Nvidia, Amazon.com, Meta Platforms, and Alphabet. In aggregate, these four companies are projected to report year-over-year earnings growth of 79.7% for Q1 2024,” concluded Butters.
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