Analysts are predicting a major bounce back in earnings for several companies in the S & P 500 this year, but not all of these companies will live up to expectations, according to Trivariate Research. “Full year 2024 guidance has not been reduced. This in effect creates an ‘implied’ 2H of 2024 guidance that is perhaps excessively optimistic,” CEO Adam Parker wrote Sunday. Parker’s warning comes after S & P 500 reported earnings growth of 4.2% for the fourth quarter on a year-over-year basis, per FactSet. That marks the second straight quarter of bottom-line growth for the benchmark. Against this backdrop, Parker recommended investors be overweight in health care and energy sectors, where he believes companies are more likely to meet estimates, and to be equal-weight in technology — where he prefers “accelerating but low-growth software and AI-semiconductors.” He also screened for stocks in which there’s a big difference between earnings expectations for the first and the second half of the year. In these cases, analysts expect profits to underperform in the first six month of 2024 before ripping higher in the back half of the year. Parker surmises that these stocks may disappoint on these aggressive earnings turnarounds. Here are some of those names: Despite his overweight recommendation on health care, Parker pointed out that estimates for this year have consistently come down over the last six months for the first three quarters of this year, and that many larger companies — including AbbVie , Abbott Laboratories and Humana — have lowered their numbers. Pharmaceutical company AbbVie has a 5.1% differential between its second- and first-half expectations, while biotech Amgen has a 13.2% differential, according to Trivariate. AbbVie shares are up 15.2% this year, and analysts surveyed by FactSet think the stock has just 2.1% upside. Wells Fargo said last month AbbVie’s growth profile “looks great starting 2024” and that it expects multiple expansion throughout the year, particularly as its Skyrizi and Rinvoq treatments appear set to overtake its Humira drug in the long run. The firm’s $200 price target suggests roughly 12% upside. Cosmetics manufacturer Estee Lauder , part of the consumer staples sector, has the highest differential of the group at 45.6%. Although Parker likes staples as a defensive hedge, he doesn’t like the names where a major rebound in the second half is needed to achieve estimates. Estee Lauder, which has plunged more than 42% over the past year, has been hit by rising competition from smaller brands, a struggling China travel retail business and slower U.S. sales. Consensus estimates from analysts surveyed by FactSet suggest the stock, which is down nearly 5% this year, could gain 13.2% from Monday’s close. Other names with significant differentials include discount retail chain Dollar Tree , snacks company Mondelez International and personal care products manufacturer Procter & Gamble .
