Closing the Quarter: Q4'24

Heading into earnings season, our Q4’24 Inside The Buy-Side® Earnings Primer® survey, published January 9, registered a notable pickup in sentiment but with new and persistent challenges tempering outright bullishness, including policy uncertainty and tariff concerns. While only 14% reported a negative shift in sentiment due to the result of the U.S. Presidential election, 87% expressed heightened or sustained concern over U.S. trade and tariffs when aided — a 26% sequential uptick. Inflation, which many believed was receding in the previous quarter’s survey, reemerged as a key issue, jumping 17 points to 28%. Finally, investors expressed a clear growth preference, with growth being prioritized over margins by a 2:1 ratio, and 66% favoring Reinvestment as the top use of cash, a 27-point increase QoQ.

With Q4’24 earnings largely in the books, we “Close the Quarter” with some notable themes:

1. Earnings Performance: Q4 Earnings Prints Surprised to the Upside, But with Deceleration Forecasted Ahead; Revenue Beats Settled Below the 5-Year Average
2. Guidance Moves and Consensus Shifts: More Companies Widened Annual Top-Line Guidance Spreads Versus Practice this Time Last Year, while 2025 EPS Forecasts are More Mixed; Across Sectors, roughly 7 in 10 Companies Experienced Positive Revenue and EPS Consensus Revisions Following Earnings Results
3. A New ‘Don’: First Two Months of 2025 See President Trump and His Administration Utilize ‘Information Flooding’ as Key Policy Tactic, Leaving Many Investors Looking for Clarity on Earnings Calls; Avoid Discussions about the Unknown, But Prepare to Provide Increased Transparency / Perspective in the Near Future
4. Capital Allocation: Cash Deployment Trends Reveal Dividends En Vogue Alongside Continued Positive Capex Momentum; Conversely, Buybacks Pulled Back and M&A Activity Ebbed QoQ with Tepid Trends to Start the Year

As we wrap up our coverage of Q4’24 earnings season, it’s clear that despite the spurts of market volatility induced by policy uncertainty, companies have continued to put together solid earnings results. However, with positive revenue surprises falling short of the five-year average for the S&P 500, the key question for upcoming quarters centers on whether demand trends will continue to accelerate, as many have projected with back-half strength built into annual guides, especially with an investment community increasingly focused on growth.

While predicting the exact timing of a significant demand shift remains elusive for executives, there are proactive measures you can take to reassure investors. By taking control of your narrative and clearly communicating the strategies you are implementing to navigate current challenges — always with transparency and candor — you can enhance investor support in your investment thesis and right to win, regardless of the backdrop. As I always say, “Don’t own the macro”!