Q3 P/L Challenge: How do you trade the volatile markets?
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How will Q3 earnings impact S&P 500？
Investors are preparing for what may be the worst reporting season in two years when Wall Street's third quarter earnings season begins this week.
According to FactSet, analysts expect the S&P 500's profits growth rate to be just 2.9%, which, if realized, would be the worst year-over-year (yoy) growth since Q3 2020.
The index's projected revenue increase of 8.7% yoy raises additional concerns because it would be the first quarterly revenue growth below 10% since Q4 2020.
Markets are in poor shape going into the reporting season as US stocks are expected to decline due to worries that the Federal Reserve's aggressive rate hikes would trigger a potential recession.
Q3 Sector Estimates: Winners and Losers
According to FactSet, the Energy sector is anticipated to post the most yoy increase in earnings with a staggering 115.7% increase in third quarter EPS. Due to rising oil and natural gas prices—the average price of WTI crude in Q3 2022 was $91.62 per barrel, 30% higher than a year earlier—the sector's income is anticipated to rise 35.6% yoy.
Industrials, led by the groupings for airlines and aerospace & defense, are anticipated to post the second-highest yoy increase in earnings with a significant 24.2% increase in Q3 EPS. The industrial sector, which is the most susceptible to changes in the economy, is anticipated to show the fourth-largest yoy revenue growth, with Q3 sales forecast to increase by 12.7%.
Contrarily, it is anticipated that Communications Services, which comprises telecom firms as well as providers of media, entertainment, and online media services, will show a 13.2% decline in yoy earnings.
Financials are expected to record a meager 2.6% year-over-year gain in revenue and a decline of 11.8% year-over-year in Q3 EPS due to higher provisions for loan losses, a significant slowdown in stock trading, and less M&A and IPO activity.
Q3 Stocks Biggest Upward EPS Estimate Revisions
According to FactSet, $Exxon Mobil(XOM.US)$ and $Chevron(CVX.US)$ are anticipated to make up the majority of the companies responsible for the Energy sector's yoy increase in earnings, reporting triple-digit profit growth and double-digit sales growth.
$Occidental Petroleum(OXY.US)$, which is anticipated to report EPS of $2.68, up 208% from a profit of $0.87 in the year-ago period, and $ConocoPhillips(COP.US)$, which is anticipated to record a 117% yoy increase in EPS, are other names in the group that are set to enjoy significant improvements in Q3 results.
$Delta Air Lines(DAL.US)$, $Southwest Airlines(LUV.US)$ and $United Airlines(UAL.US)$ are a few companies to keep an eye on in the industrial sector given the uptick in air travel. Delta is anticipated to report Q3 EPS of $1.56, up 420% from the prior year.
Stocks With the Biggest Cuts in Q3 EPS Expectations
On the downside, $Netflix(NFLX.US)$ and $Meta Platforms(META.US)$ have been two of the biggest factors in the decline in anticipated earnings for the Communication Services sector in Q3. META's EPS is anticipated to drop by 40% to $1.93, while Netflix is anticipated to have a 31.7% decline in earnings to $2.18 per share.
The technology industry is arguably the most susceptible to rising interest rates and high inflation, and $Intel(INTC.US)$ is among the main causes of the sector's declining anticipated earnings. The ailing chip manufacturer is expected to report EPS of $0.35, which is down 79.5% from EPS of $1.71 in the same period last year. Another firm that has seen its EPS forecasts reduced recently is $NVIDIA(NVDA.US)$, which is expected to record an EPS decline of 40% year over year.
It is also anticipated that a number of equities in the consumer discretionary sector, which significantly depend on the health of US consumers, would report poor results.
The current state of the economy has caused estimates for $Carnival(CCL.US)$, $Royal Caribbean(RCL.US)$, and$Norwegian Cruise(NCLH.US)$ to be drastically reduced.
It's All About Guidance
Given a poisonous mix of rising interest rates, growing concerns about a recession, and extremely high inflation,investors will be closely monitoring pronouncements on forward guidance and updated outlooks in the months to come.
The US dollar's strength will also be crucial since it puts a lot of businesses with exposure to foreign markets, particularly those in the materials and information technology industries, at a disadvantage.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more
SpyderCall : good article!
meruson : forward guidance decides whether a stock rises or falls, not earnings. market is forward looking. we are looking at the future when we see the current stock price.
stitchmailbox : Fed and US govt will ensure the market go down and econmy goes into recession.
Cant be all experts say coming but end up no come. Then experts no one believe already
Embrace for Friday again
lightfoot : Certain sectors will fall back hard. CEO's are not as creative and maybe overpaid! overrated. Companies failed to look for new markets, reduce inventories if Sales are falling. Cash is essential during this Biden era of Kill the Economy. He is screwing us all no liberal socialist exempt. What ignorance or is it Tyranny on the Republic. Now, corporation are following Biden's agenda like auto industry has stopped for electrical cars and trucks. This is the giant killer of our nation. Where did this stupidity come from. We have put the cart before the horse. Grids were never considered, charging stations, sustainable non explosive batteries. cost of production, unskilled labor, nickel, silver we do not have a sufficient supply. You need engineers, problem solvers. accountants, Bring back the horse and put him before the cart please.
ASIA CONQUEROR lightfoot: Well put!
102129457牛牛 : 帮我点赞，谢谢
HuatEver : A good reference guide for most investors, especially for those who are new to the stock market.
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