Get ready, Wall Street. This could be a banner earnings season for the S&P 500, according to data from S&P Capital IQ.
The company forecasts second-quarter earnings will grow at least 6.2 percent on a year-over-year basis. The increase will boost S&P 500 operating earnings per share for the trailing 12 months to an all-time $123.61 a share, topping the previous trailing 12-month high of $121.81, set after last quarter’s results.
“History implies that the final tally will likely be even better than 6%, as actual EPS exceeded initial estimates in each of the last 21 quarters and have done so by an average of 3.6 percentage points,” Sam Stovall, chief investment strategist at CFRA Research, said in a note Monday.
S&P Capital IQ expects growth to be led by energy, financials and information technology. Energy earnings are expected to grow by a massive 387 percent for the second quarter. But Stovall said the jump is more a reflection of the sector’s poor performance during last year’s second quarter.
“A year ago, energy generated EPS of $0.75 per share in Q2, the worst of all 11 sectors. In the current quarter, energy is projected to post EPS of $3.65 (thus the 387% increase), which, if realized, would vault Energy to eighth place out of 11 sectors,” Stovall wrote. “An improvement to be sure, but the percentage growth masks a sector still struggling with a recovery.”
Energy is the second-worst-performing sector in the S&P 500 this year, falling 14.5 percent. The sector has struggled with an oil market plagued by oversupply concerns. In 2017, U.S. crude has dropped nearly 17 percent.
Financials, meanwhile, are expected to have a strong showing, led by investment banking and brokerage. Stovall noted the area “is expected to record strong double-digit revenue growth from capital markets in both equity and fixed income trading areas, as investment banking got a boost in advisory fees for IPOs and M&A provided continued growth.”
Financials got off to a slow start earlier this year, but have outperformed other sectors over the past three months. In that period, the sector has jumped 6.7 percent, with shares of large-cap banks surging.
As for technology, this year’s best-performing sector, Stovall said earnings should receive a boost from a weaker dollar.
“The U.S. dollar influences the financial results of S&P 500 IT sector companies, given their substantial exposure to foreign sales. Declines in the dollar versus international currencies make U.S. products and services relatively less expensive for purchase in other currencies,” he said.
The dollar index, which measures the greenback’s performance against six major currencies, fell 4.9 percent during the second quarter.
S&P Capital IQ expects second-quarter earnings per share for technology to jump 11.1 percent.
Source: Investment Cnbc
Second-quarter results will lift profits for US companies to a record, according to S&P