This Week in Earnings – Q4’24

This earnings season, executives remain mixed and acknowledge a still challenging operating environment, citing continued limited visibility across most end markets. While certain pockets — such as data center infrastructure — continue to show strength, residential construction, auto, and consumer-facing markets remain sluggish – this echoes executive commentary from our Industrial and Consumer Sector Beats. Companies maintain hope for improved conditions later in 2025, but few are willing to make firm calls on the timing of a demand recovery.

Furthermore, companies continue to navigate a complex pricing environment. While some note benefits from input cost deflation, others — particularly in Europe — face pricing pressure due to overcapacity and soft demand. In response, firms are prioritizing cost discipline, efficiency gains, and productivity initiatives to protect margins and sustain profitability

Trade and industrial policy continue to garner outsized attention on calls, with executives increasingly discussing the impact of tariffs and the potential for reshoring and nearshoring. Across the sector, companies generally see their localized supply chains providing insulation from trade disruptions, though some anticipate higher domestic manufacturing investment as a second-order effect.

Overall, the Materials sector continues to lag broader S&P 500 earnings performance, delivering lower EPS beat rates and standing out as one of only two sectors (along with Energy) reporting negative YoY earnings growth (blended — estimated and reported) for Q4’24. While some executives express guarded optimism for an improving backdrop later this year, the near-term picture remains cloudy, and companies are maintaining sharp focus on cost control and execution.

Key Themes:

• Macro and Outlook – ‘Fundamentals Remain Constructive’, though Visibility is ‘Not Very Good’; Many are Hoping for Improvement as the Year Progresses
• Demand – Trends Reveal Choppiness and Consumer Caution across Most End Markets, Particularly Chemicals and Residential Construction, with Expectations of Flat to Modest Recovery in Upcoming Quarters; Those Tied to Data Center Buildouts Remain a Notable Bright Spot
• Pricing – Dynamics Are Mixed across the Sector; Where Pricing Remains Under Pressure, Execs Emphasize Improved Input Costs and Efficiency Efforts as Offsets
• Tariffs – Executives Highlight Robust Local Supply Chains Minimizing Potential Tariff Impacts; Anticipation Surrounding Reshoring and Nearshoring Gains Momentum