In Exhibit 1 we undertake a regional comparison of EPS growth rate projections and measure the delta change from the forecasts in place at the start of the year. The overall picture remains positive with both the US and Global ex US 2024 growth rates of around 11%.
However, we can see that except for Japan every region has experienced negative deltas to the growth rates. Chinese equities have seen the largest reduction followed by the US ex Mag 7 which has a growth rate almost half that of the aggregate US market.
Exhibit 1: Positive EPS growth rates but negative EPS growth rate deltas across most regions
Contrasting US EPS growth narratives - A halving or doubling?
In Exhibit 2, we compare the EPS growth rate trajectory for the aggregate US equity market, the US ex Mag 7, and the EPS profile for the Mag 7 in isolation. The US ex Mag 7 has seen the 2024 EPS growth rate projection decline sequentially year to date – almost halving. By contrast the Mag 7 EPS growth rate has almost doubled. The weakness in the Ex Mag 7 EPS is now starting to impact the aggregate index growth rate profile.
Exhibit 2: Three perspectives on US equity market EPS growth rate profiles
What Long term EPS Growth rate is being priced into the Mag 7 stocks?
Equities are a long duration asset class with valuations reflecting a blend of both short term and long-term EPS growth prospects. In Exhibit 3 we show the long-term EPS growth rate projections for the US Mag 7 stocks. We can see the recent AI bubble pushed Long Term growth expectations up to 28% but this optimism/exuberance didn’t last long. The long-term growth rate has now been pared back towards the 20% range.
Exhibit 3: The AI uplift has been pared back
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