Operating expenses climb to new high for rated US companies in Q4 2024

Operating expenses for rated US nonfinancial companies rose in the fourth quarter of 2024 as investment-grade companies recorded a new high in business costs.

Total operating expenses for US companies rated by S&P Global Ratings grew to $3.885 trillion in the fourth quarter, according to S&P Global Market Intelligence data.

The latest figure represents an increase of just over $123 billion from the previous quarter and more than $200 billion higher than the fourth quarter of 2023. Operating expenses include rent, employee pay, office supplies, equipment and other non-capital expenditures.

Expenses for investment-grade companies — those rated BBB- or higher — climbed to $3.247 trillion, the highest total for the group since at least 2019. For non-investment-grade companies, however, the $638.79 billion in expenses is lower than quarterly operating costs in early 2022.

Just three of 10 nonfinancial sectors tracked by Market Intelligence reported a decline in expenses for investment-grade companies — materials, energy and utilities. For lower-rated companies, just two nonfinancial sectors reported declines — industrials and utilities.

Ratios

Operating expenses for the median US investment-grade and non-investment-grade companies consumed a greater share of total revenue in the fourth quarter, according to Market Intelligence data. Ratios measuring that balance rose to 82.68% for investment-grade companies and 91.29% for non-investment-grade companies.

Six of 10 nonfinancial, investment-grade sectors recorded a rise in the median ratio of operating expenses to total revenue, with the sharpest rise in the communication services sector, where the median ratio grew by 3.3 percentage points to 81.82%. Information technology, healthcare, energy and real estate companies recorded a quarter-over-quarter drop in their median ratios.

For non-investment-grade companies, just four sectors reported an increase in their median ratios — materials, consumer discretionary, industrials and energy. The energy sector recorded the sharpest rise in median ratio, jumping 8.82 percentage points to 90.08%.