With the Q4 2024 earnings season winding down, overall earnings for companies in the S&P 500 have exceeded earlier expectations. 76% of companies have reported earnings above expectations, which is below the 5 year average but above the 10 year average.

The Financial, Consumer Discretionary and Communication Services have been the largest contributors to aggregate earnings. Inside the Consumer Discretionary and Communication Services sectors, 47% of holdings are Meta, Google, and Netflix; and 40% Amazon and Tesla, respectively.

While Mag7 shares are providing most of the earnings and a plurality of holdings across many sectors, are the share prices of Mag7 stocks beating or missing earnings estimates and how are their share prices reacting to earnings news?

The Magnificent 7 (aka Mag7) stocks include Tesla, Amazon, Google, Apple, Nvidia, Microsoft and Meta (Facebook). Nvidia reports earnings February 26 after the market close and is the last to report earnings.

Below are the estimates for earnings, actual earnings, and the stock price reaction since then.

Stock                    Estimate/Actual                  Price reaction

TSLA                      .62/.73      Beat!            Stock jumped for two days, currently about 30% lower

AMZN                  1.51/ 1.86    Beat!            Price declined immediately is about 15% lower

GOOGL               2.12/ 2.15     Beat!           Price declined immediately,

AAPL                  2.35/ 2.3       Beat!           Price climbed and has given some back, +5%

NVDA                  .79/.89         Beat!           Day after gave up almost 10%

So while earnings are doing very well and the Mag7 continue to be profit machines, their share prices are not reflecting what one might expect.

All this boils down to a change in Sentiment. The facts are there, but the willingness of investors to pay ever higher prices for growing earnings is on the wane. Earnings overall are expected to grow by 15% in 2025, but we are likely to see stock prices behave differently, perhaps more like 1974, where earnings grew but prices sank.

Recent economic data also shows Consumer spending declined far more than expected as consumers trim spending given the uncertainty of the jobs outlook, tariffs, and other unknowns. Consumer spending is the backbone of the US economy and if consumer sentiment continues to worsen, US economic growth may stall as the year progresses.