- Wall Street’s Q2 earnings season kicks off on Friday.
- Analysts expect annualized profit growth of 8.8% and an increase of 4.6% in revenue growth.
- I used the InvestingPro stock screener to identify high-quality stocks poised to deliver double-digit profit and sales growth amid the current climate.
Get ready for more volatility; the next major test for the stock market is upon us.
Wall Street’s second-quarter earnings season begins on Friday, when notable banks like JPMorgan Chase (NYSE:), Wells Fargo (NYSE:), and Citigroup (NYSE:) deliver their latest financial results.
Savvy investors would know that having the right picks for earnings season is one of the main keys to outperforming the market.
Top Q2 Earnings to Keep an Eye on This Month
The week following big banks’ earnings will see high-profile names like Netflix (NASDAQ:), Bank of America (NYSE:), Goldman Sachs (NYSE:), Morgan Stanley (NYSE:), BlackRock (NYSE:), American Express (NYSE:), UnitedHealth (NYSE:), Johnson & Johnson (NYSE:), American Airlines (NASDAQ:), and United Airlines (NASDAQ:) report earnings.
After that, Q2 earnings season gathers momentum in the final week of July when the mega-cap tech companies, including Tesla (NASDAQ:), Microsoft (NASDAQ:), Alphabet (NASDAQ:), Amazon (NASDAQ:), Meta Platforms (NASDAQ:), and Apple (NASDAQ:) are all scheduled to release their quarterly updates.
According to FactSet estimates, earnings per share for the S&P 500 are expected to grow +8.8% in the second quarter when compared to the same period last year. That is slightly lower than the +9.1% annual earnings growth for the quarter forecast on March 31.
Source: FactSet
As the chart above shows, the Communication Services sector (NYSE:) is expected to report the largest annualized earnings growth rate of all eleven sectors, at +18.4%. The space includes notable companies such as Google-parent Alphabet, Facebook owner Meta Platforms, Netflix, Walt Disney (NYSE:), as well as Verizon (NYSE:), and AT&T (NYSE:).
Anticipated Sector Performance and Growth Rates
The Health Care sector (NYSE:) is forecast to come in second, with +16.8% year-over-year EPS growth. Eli Lilly (NYSE:), Merck (NYSE:), UnitedHealth, Johnson & Johnson, AbbVie (NYSE:), Amgen (NASDAQ:), Pfizer (NYSE:), and Moderna (NASDAQ:) are included in this sector’s mix.
Elsewhere, the Information Technology sector (NYSE:) is expected to report the third-highest annualized earnings growth rate, at +16.4%. Some of the biggest names in the sector include AI darlings such as Microsoft, Nvidia (NASDAQ:), Broadcom (NASDAQ:), Oracle (NYSE:), Salesforce (NYSE:), Advanced Micro Devices (NASDAQ:), and Super Micro Computer (NASDAQ:).
The Energy sector (NYSE:), which includes oil and gas giants such as ExxonMobil (NYSE:), Chevron (NYSE:), EOG Resources (NYSE:), Schlumberger (NYSE:), and ConocoPhillips (NYSE:), is forecast to deliver the fourth-highest year-over-year earnings growth rate, at +12.4%.
In contrast, earnings from the Materials sector (NYSE:), which includes companies in the metals and mining, chemicals, construction materials, and containers and packaging industry, are expected to fall -9.7% compared to last year – the worst drop of any sector by far.
The Industrials sector (NYSE:) is projected to report the second-worst Y-o-Y earnings slump of all eleven sectors, with EPS set to decline -3.4% from a year earlier, per FactSet. Notable names include GE Aerospace (NYSE:), Caterpillar (NYSE:), Uber Technologies (NYSE:), Honeywell International (NASDAQ:), Boeing (NYSE:), United Parcel Service (NYSE:), Lockheed Martin (NYSE:), and Deere (NYSE:).
Forecasted Revenue Growth Across Sectors
Meanwhile, revenue expectations are slightly less positive, with sales growth for the S&P 500 expected to increase by +4.6% from the same quarter a year earlier. If that is the reality, FactSet pointed out that it would be below the five-year average revenue growth rate of +6.9%.
Source: FactSet
As seen above, nine sectors are projected to report year-over-year growth in revenues, led by the Information Technology, Energy, and Communication Services sectors, at +9.5, +9.0% and +7.3%, respectively.
On the other hand, the Materials sector is predicted to report a Y-o-Y decline in revenues, at -2.0%.
Strategic Moves for Investors
Markets are heading into the Q2 reporting season on a strong note, with the and both trading at all-time highs amid growing bets of an autumn interest rate cut from the Federal Reserve.
Amid the current backdrop, I used the InvestingPro Stock Screener to search for companies that are poised to deliver annualized growth of 25% or more in both profit and sales as the second quarter earnings season kicks off.
In total, just 19 stocks showed up in my screener.
Source: InvestingPro
InvestingPro’s stock screener is a powerful tool that can assist investors in identifying high-quality stocks with strong potential upside. By utilizing this tool, investors can filter through a vast universe of stocks based on specific criteria and parameters.
Promising Stock Picks for the Upcoming Quarter
Meanwhile, Blackstone (NYSE:), Newmont Corporation (NYSE:), Eli Lilly, PDD Holdings (NASDAQ:), Hess Corporation (NYSE:), Nu Holdings (NYSE:), MercadoLibre (NASDAQ:), Axon Enterprise (NASDAQ:), and First Solar (NASDAQ:) are a few more stocks to watch out for that are also projected to deliver double-digit Q2 earnings and revenue growth.
If you’re already an InvestingPro subscriber, you can view the full list of the 19 stocks that met my criteria here.
The Power of InvestingPro: Navigating Investment Opportunities in Turbulent Times
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Note: At the time of crafting this piece, the author holds long positions in the S&P 500 and the Nasdaq 100 through the SPDR S&P 500 ETF (SPY) and the Invesco QQQ Trust ETF (QQQ). Additionally, there is an extended position in the Technology Select Sector SPDR ETF (NYSE:).
Frequently readjusting a personal portfolio of individual stocks and ETFs is a routine practice, guided by continuous evaluation of macroeconomic conditions and the financial health of various companies.
The opinions presented in this article reflect the author’s perspective and should not be construed as financial advice.
For more profound insights and analysis of the stock market, consider following Jesse Cohen on X/Twitter @JesseCohenInv.