FactSet sees S&P 500 earnings rising 29.5% year over year in the third quarter, with growth forecast in all 11 sectors. The estimate has climbed, but companies still have to deliver.
Major U.S. banks are among the first large companies due to report in early October.
After a lackluster September, strong earnings could help stocks regain ground. The bar has risen, though: companies need to match unusually high expectations as third-quarter results come in.
Of the 116 S&P 500 companies that had issued third-quarter earnings guidance, 72-62%-gave positive guidance. Those forecasts reflect corporate expectations before results are reported, not actual earnings.
High expectations for profits
FactSet expects S&P 500 companies to post 29.5% year-over-year earnings growth in the third quarter. If that estimate holds, it would mark the index's third consecutive quarter above 25% growth. Analysts started the quarter at 26.7% and raised their projections over the following three months.
FactSet's September estimate put revenue growth at 12.3%. Its earnings-growth forecast also topped the five-year average of 16.4% and the 10-year average of 10.3%, according to a FactSet earnings-season analysis.
That upward revision leaves companies with a higher bar than they faced at the quarter's start. The 29.5% figure remains an estimate, not a final tally. FactSet's per-share earnings forecast rose 1.4% between June 30 and September 30, despite the usual pattern of estimates falling during a quarter.
The reporting season had just begun in early October. Reuters said analysts using LSEG data expected S&P 500 earnings growth of more than 30% year over year. That was also a forecast, not a reported result, as noted in a Reuters market report.
Growth across sectors
FactSet expects earnings to grow in all 11 S&P 500 sectors. It forecasts double-digit gains for energy and information technology. Communications is also expected to post double-digit growth, as are materials and industrials.
Russell Investments projected earnings growth of about 20.3% for the largest AI companies, compared with 27.7% for the other 493 S&P 500 companies-a forecast suggesting that projected growth was not limited to the biggest technology names.
The S&P 500 represents about 80% of total U.S. stock market capitalization. Its results offer a substantial view of corporate profits, but do not cover every public company.
