Second-Quarter Earnings: Lofty Expectations

Summary

• Second quarter S&P 500 earnings are expected to grow approximately 24% year over year, with analysts raising estimates by 3.9% from March 31 to June 30.
• Revenue growth forecasts are near 12% across all 11 sectors, marking the fastest pace since 2022.
• Company guidance skewed positive with 63 firms issuing positive outlooks versus 48 negative, compared to a historical average of 41% positive.
• Financial institutions including Wells Fargo, JPMorgan, Citigroup, Goldman Sachs, Morgan Stanley, & Bank of America will open the season in mid-July to set the macro tone.
• AI hardware bellwethers such as Taiwan Semiconductor & ASML will report in mid-July to provide insights on chip demand & capital spending.
• Major technology platforms including Microsoft, Alphabet, Meta, Amazon, Apple, & Tesla are scheduled to report in late July or early August.
• Nvidia is set to report on August 26, while healthcare & energy sectors will report later in the season.
• The market is trading near the 7,450 year-end target at approximately 20 times forward earnings, which is above five- & 10-year averages.
• Geopolitical risks, specifically tensions in the Middle East, remain a potential downside risk alongside the possibility of earnings disappointments.
• Analysts maintain a modestly positive outlook on stocks while holding forecasts steady due to lofty expectations leaving little room for error.