Wall Street eyes tranquil earnings season as S&P 500 estimates climb to 23.3 per cent
With negative preannouncements remaining low and estimates rising, the second quarter is on track for the seventh consecutive period of double-digit growth for the benchmark index.
Wall Street is bracing for a calm earnings season, characterised by a steady upward trajectory in corporate profit forecasts and negative preannouncements sitting well below historical norms. JPMorgan strategist Mislav Matejka attributes this optimism to tangible improvements in economic activity, particularly within European manufacturing, which has shown resilience despite geopolitical headwinds.
Data from FactSet indicates the S&P 500’s estimated year-over-year earnings growth for the second quarter stands at 23.3 per cent. This figure significantly exceeds the five-year average of 16.4 per cent and the ten-year average of 10.3 per cent. If these estimates hold, it will mark the second consecutive quarter of growth above 20 per cent and the seventh consecutive quarter of double-digit expansion for the index.
Ten of the eleven sectors in the S&P 500 are expected to report earnings growth, with the Energy, Technology, and Materials sectors leading the charge. This performance is being underpinned by massive capital expenditures from hyperscalers such as Amazon, which have channelled hundreds of billions of dollars into hardware, memory chipmakers, power generation, and data centre construction.
Consumer resilience has played a pivotal role in stabilising the broader US economy amid sticky inflation. This strength was evident in a strong quarterly report from Delta Air Lines, highlighting the durability of demand across various industries. Truist chief markets strategist Keith Lerner described the current environment as an "earnings boom," noting that estimates are rising across large, mid, and small-cap stocks, as well as in emerging markets.
Matejka emphasised that the upward drift in estimates likely reflects genuine improvements in corporate fundamentals rather than analyst complacency. As the reporting season begins, investors are looking to confirm whether these robust estimates can be sustained in the face of ongoing global economic complexities.
