Published: January 9, 2024 at 9:13am ET
Every earnings reporting season, headlines about companies “beating'' consensus estimates with quarterly profits appear in quick succession. However, “success” alone does not mean anything. The S&P 500's “beat rate” is typically 70%. Also, the profit may be a lower net loss than expected. It's as if the analysts working for the companies and brokerages they're being coached are underestimating the beat settings.
U.S. earnings season begins on Friday, when the nation's largest banks report their fourth-quarter results.
Every earnings reporting season, headlines about companies “beating'' consensus estimates in quarterly profits appear one after another. However, “success” alone does not mean anything. The S&P 500's “beat rate” is typically 70%. Also, the profit may be a lower net loss than expected. It's as if the analysts working for the companies and brokerages they're being coached are underestimating the beat settings.
U.S. earnings season begins Friday, when major U.S. banks report their fourth-quarter results. Investors may expect rough comparisons to prior-year results, as there are a myriad of one-time items that could reduce earnings.
Perhaps investors should look ahead to 2024 to see which companies are expected to grow their annual profits the most. One of his ways to start this process is to look at the weighted estimates for the 11 sectors of the S&P 500 SPX. All estimates in this article are based on calendar years. About 20% of S&P 500 companies have fiscal years that don't match the calendar, but FactSet provides estimates that are adjusted to match the calendar.
Below, analysts rank sectors by how much they expect 2024 weighted earnings per share estimates to change from 2023, with the overall S&P 500 at the bottom.
| sector or index | Expected change in EPS from 2023 to 2024 | Expected change in sales from 2023 to 2024 | Price/Weighted Consensus 2024 EPS Forecast |
| health care | 18.3% | 6.2% | 18.7 |
| information technology | 16.7% | 9.1% | 26.2 |
| communication service | 16.6% | 6.2% | 17.4 |
| Consumer voluntary | 12.5% | 6.8% | 25.5 |
| industrial | 11.9% | 5.1% | 19.7 |
| finance | 8.5% | 5.7% | 14.6 |
| public works | 8.1% | 2.8% | 16.2 |
| Daily necessities | 5.6% | 2.8% | 19.4 |
| material | 3.3% | 1.6% | 19.2 |
| real estate | 3.1% | 6.5% | 18.0 |
| energy | -0.7% | 0.5% | 11.3 |
| S&P500 | 11.6% | 5.2% | 19.6 |
| Source: FactSet | |||
Five sectors are expected to increase EPS faster than the index as a whole this year, with healthcare topping the list.
sector screen
For investors looking to jump into sectors that are expected to grow the most this year, the Healthcare Select Sector SPDR ETF and can diversify risk.
For investors considering individual healthcare stocks, we screened a group of 64 companies to narrow the list to those expected to grow EPS by at least 10% this year. We then further reduced the list to 21 with a majority buy or equivalent rating among analysts surveyed by FactSet.
Below are ranked by 12-month upside potential based on consensus price targets.
| company | ticker | Share “Purchase” rating | January 8th price | ConsTarget price | 12-month upside potential | Expected change in EPS from 2023 to 2024 |
| Humana Co., Ltd. |
ham |
73% | $460.74 | $583.21 | 27% | 11% |
| Elevance Health Co., Ltd. |
E.L.V. |
85% | $480.05 | $566.21 | 18% | 12% |
| Insight Co., Ltd. |
Incy |
57% | $65.82 | $75.85 | 15% | twenty one% |
| Insulet Co., Ltd. |
pod |
83% | $202.43 | $231.52 | 14% | 26% |
| Cigna Group |
CI |
61% | $313.63 | $354.34 | 13% | 14% |
| Zoetis Inc. Class A |
ZTS |
84% | $196.15 | $220.75 | 13% | 11% |
| United Health Group Co., Ltd. |
UNH |
78% | $536.52 | $601.87 | 12% | 12% |
| ResMed Co., Ltd. |
RMD |
74% | $172.77 | $192.80 | 12% | 12% |
| Dexcom Co., Ltd. |
DXCM |
88% | $129.63 | $141.70 | 9% | 20% |
| West Pharmaceutical Services Co., Ltd. |
WST |
55% | $351.85 | $382.46 | 9% | Ten% |
| GE Healthcare Technologies Co., Ltd. |
GEHC |
60% | $77.36 | $83.88 | 8% | 11% |
| Boston Scientific Corporation |
BSX |
87% | $58.42 | $63.16 | 8% | 12% |
| striker company |
SYK |
59% | $299.98 | $323.96 | 8% | 11% |
| mckesson company |
Mac |
78% | $476.63 | $512.47 | 8% | 11% |
| Merck & Co. |
M.R.K. |
85% | $117.38 | $125.03 | 7% | 484% |
| Edwards Lifesciences |
E.W. |
53% | $75.67 | $79.04 | Four% | Ten% |
| Intuitive Surgical Co., Ltd. |
ISRG |
63% | $328.86 | $340.58 | Four% | 15% |
| Eli Lilly |
Lily |
77% | $626.03 | $645.73 | 3% | 87% |
| Align Technology Co., Ltd. |
Alignment |
75% | $273.94 | $282.32 | 3% | 11% |
| Idex Laboratories Co., Ltd. |
IDXX |
62% | $543.96 | $542.15 | 0% | 12% |
| Vertex Pharmaceuticals Co., Ltd. |
VRTX |
69% | $419.12 | $417.22 | 0% | Ten% |
| Source: FactSet | ||||||
If you're considering an individual stock, you should do your own research to form your own opinion on how likely the company is to remain competitive for at least the next 10 years. One way to start this process is to click on the ticker.
Click here for Tomi Kilgore's detailed guide to the wealth of information available for free on MarketWatch's quotes page.
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