Citi strategists said the Q1 reporting season can be described as a "beat-and-hold," noting that 2024 consensus growth expectations for the remain largely unchanged, though there are notable signs of sector and single-stock broadening.

Meanwhile, the relationship between sector earnings and stock performance has been so far mixed during this reporting period, they added.

“To us, the good news is that market-implied growth expectations have come in with the index pullback, creating a more beatable setup relative to analyst expectations,” strategists noted.

“All told, valuations are still telling us strong fundamentals are expected, and need to be delivered on,” they said, adding that their 2024 S&P 500 earnings per share (EPS) estimate of $245 “should be attainable, if not conservative.”

Sector-wise, the quarter-to-date performance doesn't closely match Q1 reporting trends, Citi said. In particular, Communication Services, Financials, and Utilities outperformed relative to their strong earnings beats.

In terms of broadening, Mega-cap stocks remain crucial to index growth, though this influence should lessen as the year progresses, particularly if economic data indicates continued recovery in manufacturing. The "other 493,” on the other hand, are just beginning to show growth for 2024, implying stabilization now and growth later, strategists highlighted.

As for growth trends, Citi strategists said they continue to strongly emphasize their market-implied growth, which indicates a more favorable outlook.

“Market-implied growth expectations, the annualized 5-year FCF growth rate needed to justify current index levels, have fallen thus far into the quarter as the index has pulled back while fundamentals improve,” strategists wrote.

“Currently, most sector implied growth rates look attainable relative to consensus analyst expectations,” they added.