Think S&P 500 companies’ second-quarter profit growth is impressive? You’re right. But some companies are about to show you much more is possible.
Seven companies in the S&P 500, including energy giant Chevron (CVS), Walt Disney (DIS) and Marriott International (MAR), are expected to post massive adjusted profit per share growth in the pivotal third and fourth quarters, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Analysts are forecasting all these S&P 500 companies to put up profit growth of 500% or more in the final two quarters of the year.
Pinpointing where to find powerful profit growth is getting tougher as many of the big gains are behind us.
“The likely peak in (earnings per share) growth for this earnings cycle, along with stubbornly strong inflation readings and the ongoing threat posed by the Delta variant, may cause investors to consider pocketing some of this year’s gains,” says Sam Stovall, market strategist at CFRA.
- 1 S&P 500 Profit Up Huge: What’s Next?
- 2 Brace For Chevron’s Texas-Sized S&P 500 Profit
- 3 Get Ready For Back-To-Travel Boom
- 4 Biggest Profit Jumps Coming In S&P 500
S&P 500 Profit Up Huge: What’s Next?
It’s easy to understand why S&P 500 investors are already looking past the second-quarter’s profit season. How can companies top such a remarkable period?
More than 59% of companies in the S&P 500 already reported second-quarter results, says John Butters of FactSet. And the numbers are historic. All told, S&P 500 companies posted 85.1% profit growth in the period. That’s on track to be the index’s highest growth rate since it jumped 109% in the fourth quarter of 2009.
Analysts, though, now are sharpening their models looking for what’s coming in the back half of 2021. And so far they’re calling for a moderation for the S&P 500 overall. Profit for the S&P 500 is seen rising 40.7% for all of 2021. And that includes 27.7% profit growth in the third quarter.
But clearly, some S&P 500 companies are likely going to find ways to be better than average.
Brace For Chevron’s Texas-Sized S&P 500 Profit
San Ramon, Calif.-based energy giant Chevron is already surging its profit growth. And analysts see lots more where that came from.
The company is expected to post an adjusted profit of $4.04 a share in the third and fourth quarters, combined. If that’s spot on, that would mark more than 3,900% growth versus the same year-ago period. The company only made a dime a share in the third and fourth quarters of 2020.
And Chevron clearly has the momentum. On July 30, it reported a second-quarter profit of $1.71 a share. That not only topped views by nearly 7%, it marked a reversal from a huge $1.59-a-share loss in the June-ended quarter in 2020.
Shares of Chevron are up more than 20% this year so far. And energy is the top performing S&P 500 sector this year. The Energy Select Sector SPDR ETF (XLE) is up 29.3% this year.
Get Ready For Back-To-Travel Boom
Following energy, another source of S&P 500 profit growth is seen coming from consumers traveling again.
Just look at Disney. Many people apparently are declaring, “I’m going to Disneyland.” Analysts think the communications services company’s profit will hit more than $1.74 a share in the final two quarters of the year. If that’s right, it would mark a 1,350% jump from the same period a year ago. Investors, though, are in wait-and-see mode. Shares of Disney are lagging the S&P 500 this year, falling more than 3%.
But investors can take comfort in the further future, too. Disney’s profit in fiscal 2022 ended in September is seen jumping more than 110%, following an anticipated 17.8% jump in fiscal 2021. Should you buy Disney stock now?
And all these travelers must stay somewhere. Enter Marriott. Shares of the consumer discretionary company are only up 9.8% this year. And yet, analysts think the S&P 500 hotel chain will earn more than 96 cents a share in the final two quarters of the year. That’s up a whopping 879% from what the company made in the third and fourth quarters of 2020.
With powerful profit gains like these on the way, perhaps S&P 500 investors are too jaded?
“The strong (profit) momentum doesn’t appear ready to stop anytime soon,” said Ryan Detrick, chief market strategist at LPL Financial. “Estimates have been rising as companies have shared their outlooks.”
Biggest Profit Jumps Coming In S&P 500
Analysts see 500%+ jumps in profit coming in the third and fourth quarters
|Company||Ticker||EPS % ch. in Q3 and Q4 2021*||Stock YTD % ch.||Sector|
|Walt Disney||(DIS)||1,349.8%||-3.1%||Communication Services|
|Marriott International||(MAR)||878.9%||9.8%||Consumer Discretionary|
|Everest Re Group||(RE)||861.5%||8.8%||Financials|
|Pioneer Natural Resources||(PXD)||539.4%||25.0%||Energy|
Sources: IBD, S&P Global Market Intelligence, * – based on analyst estimates from Q3 and Q4 normalized profit in 2020
Follow Matt Krantz on Twitter @mattkrantz
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