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Earnings for small-cap companies in Q2 are holding up, with beats wider than average, earnings declines less than double-digits, and no large revisions, according to Jefferies.
“We are in the camp that earnings are going to hold up, get more competitive with large,” strategist Steven DeSanctis said in a note Thursday. “We only have a few more earnings reports to go for small caps, and we think Q2 was solid.”
Jefferies shared the following chart:
DeSanctis said the small-cap earnings revision ratio has remained steady for the past three months at 0.89. The sales revision rate stood at 0.90, with the three-month rolling rate just under 1.0. The earnings revision ratio for large-caps rose to 1.28, driven by tech, and sales revision ratio advanced to 0.86.
Earnings growth for small caps in Q4 is expected to come in at 13.6%, the note said, and large-cap earnings growth is seen rising 15.3%. For full-year 2024, profits are expected to slide 1.6% for small caps and large-caps’ will pop more than 9%.
Small caps are seen topping large caps next year, DeSanctis said, with growth of 16.7% versus 14.2% for large.
Charles Schwab earlier this week highlighted the outperformance of a key barometer of U.S. small-cap companies - the S&P Small Cap 600 index (SP600) - over Wall Street's benchmark S&P 500 (SP500) in H2 of 2024 so far, a trend that shows how market breadth has moved out of megacap stocks and into other areas.
For investors looking to track small-cap companies, here are some exchange-traded funds of interest: (IJR), (IWM), (VB), (VBR), (VBK), (SCHA), (SPSM), and (DFAS).
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