狮山巡礼
投资杂谈
Earnings Are Coming. Wall Street Hopes Strong Profits Can Keep the Market Rally Going.
Its almost time for Corporate America to get its quarterly report card from Wall Streetearnings season is right around the corner. There are a smattering of major companies reporting results for the third quarter this week, but theearnings delugereally kicks in the week of October 13.
Thats when Big Banks and financial firmsJPMorgan Chase
,Goldman Sachs ,BlackRock,Bank of America, andAmerican Express(among many others) are due to report results. So are megacaps in other sectors, such asJohnson Johnson,ASML Holding,Taiwan Semiconductor Manufacturing,CSX, andUnited Airlines Holdings.
To say that investors are optimistic about the upcoming results would be an understatement. According to data fromFactSet Research Systems, Wall Street is expecting an 8% year-over-year earnings increase for theSP 500
. Whats more, consensus estimates for profit growth actually rose from the start of the quarter. Thats the first time that analysts boosted their outlook during a quarter since the fourth quarter of 2021.Stocks are at record highs, due in large part tooptimism about the artificial-intelligence revolutiontaking over the economy and stock market. So it should come as no surprise that technology companies in record numbers have issued positive guidance for the quarter so far, according to FactSet.
Mega-cap growth and tech continue to do the heavy lifting, saidDeutsche Bankchief strategist Binky Chadha in a report earlier this month.
Chadha is a bit more optimistic than his peers about the third quarter as well. He is forecasting earnings growth of 10.7% from a year ago, and he argues that other strategists have been very slow to upgrade estimates after the Liberation Day cuts. That could be a mistake as the tariff fog lifted and macro data improved in the third quarter.
The realization that President Donald Trumps trade policies wont be as harsh as many originally feared is likely to have a positive effect on other sectors as well. Strategists at 22V Research pointed out in a report Friday that, based on analysis of recent earnings conference calls, corporate sentiment has rebounded from a dip in the second quarter and outlooks for margins are once again optimistic.
That should be good news for semiconductor and tech hardware companies, the prime beneficiaries of the AI boom. But the 22V Research analysts said that banks, utilities, and materials companies should also report strong earnings in the third quarter and that sentiment is strong for real estate investment trusts, telecoms, and energy firms as well. These are industry groups that may surprise to the upside, the 22V strategists said.
Jeff Buchbinder, chief equity strategist at LPL Financial, agrees. He said in a report Monday that with less suspense around tariffs, economic growth that could approach 3% for [the third quarter], the continued surge in artificial intelligence (AI) investment, and a roughly 5% drop in the average level of the U.S. dollar from the prior year quarter, corporate America has an excellent opportunity to post another low-teens earnings growth rate for the SP 500.
The problem, though, is that the market might have already caught on to the fact that third-quarter earnings should be impressive. Stocks, whichoften slumpin September,rallied last month.The Federal Reservesinterest-rate cutandhopes of more easing to comelater this year lifted sentiment further.
The good news is stocks went up, said strategists at Jefferies in a report Monday, adding that the bad news is so too did valuations.
The SP 500 now trades at 22.2 times estimates for next year. The index was valued at 21.4 times 2026 forecasts at the end of August. And valuations for Big Tech have gotten even more steep. TheMagnificent Sevenexchange-traded fund now has a forward price-earnings ratio of 31.3, up from 27.9 just before Septembers rally.
The premium could be worth it as long as AI infatuation continues. The Jefferies strategists pointed out that third-quarter earnings should rise 16% for what they dub their Sweet 16: the Magnificent Seven,Broadcom
,Intel,Advanced Micro Devices,Texas Instruments,Qualcomm,Netflix,PayPal,Adobe, andFiserv.So, even though analysts are predicting that the rest of the market should finally start showing decent earnings growth, megacap tech companies will still lead the way for the foreseeable future.
