Wall Street is expecting a tranquil earnings season.
First, negative earnings preannouncements are well below the typical level. Second, earnings estimates have been on a steady upward climb, according to the two charts below by JPMorgan strategist Mislav Matejka.
“The upward drift in estimates reflects the fundamental improvement in economic activity that became evident through Q2, particularly in Europe where the manufacturing recovery remained resilient despite geopolitical headwinds,” Matejka explained.
“We believe the rising estimates ahead of the current reporting season could potentially reflect genuine improvements in corporate fundamentals rather than analyst complacency,” he said.
The estimated year-over-year earnings growth rate for the second quarter is 23.3% for the S&P 500 (^GSPC). That’s above the five-year average of 16.4% and the 10-year average of 10.3%, according to FactSet data.
If the 23.3% estimate is hit, it will mark the second consecutive quarter of year-over-year earnings growth above 20% and the seventh consecutive quarter of double-digit growth for the index.
Ten of the 11 sectors in the S&P 500 are expected to report earnings growth, led by the Energy, Technology, and Materials sectors.
Massive capital expenditures from hyperscalers such as Amazon (AMZN) have channeled hundreds of billions of dollars directly into hardware, memory chipmakers, power generation, and data center construction.
And despite sticky inflation and periodic geopolitical headlines, the broader US economy has remained stable in part due to consumer resilience. This was on full display last week in a strong quarter from Delta Air Lines (DAL).
“We are in an earnings boom, with estimates rising across large, mid, small caps, and emerging markets,” Truist chief markets strategist Keith Lerner said in a note.
Brian Sozzi is Yahoo Finance’s Executive Editor, host of the ‘Power Players With Brian Sozzi’ podcast and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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