It’s been a rough year for S&P 500 companies’ profit. But the worst appears to be over for many — and about to boom at some.
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Twelve companies in the S&P 500, including consumer discretionary General Motors (GM), materials company Freeport-McMoRan (FCX) and health care Hologic (HOLX), are expected to more than double their profit in the fourth quarter.
And if analysts are right, such huge profit bounce-backs will give investors more faith in the economy’s recovery. It’s a hopeful sign, based on an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
“As the calendar closes in on the holiday season, investors are being rewarded for their patience,” said Sam Stovall, market analyst with CFRA.
S&P 500 Earnings: A Rough Year So Far
It might seem premature to think about earnings doubling. It’s been a rough year on the profit front for most S&P 500 companies.
S&P 500 profit is expected to plunge 14.2% in 2020, says John Butters, earnings analyst at FactSet. And revenue is seen skidding 2% in 2020, too.
Analysts remain cautious for S&P 500 profit in the fourth quarter as well. S&P 500 profit is expected to drop by 10.6% in the quarter on 0.2% lower revenue, FactSet says.
Where’s most of the pain coming from? Analysts think S&P 500 energy companies’ profit will drop 96% in the fourth quarter and 35% among industrials companies. In fact, analysts think profits will drop in seven of the 11 S&P 500 sectors in the fourth quarter.
S&P 500 Profits: Signs Of Hope
But the tide is turning. Nearly all S&P 500 companies have now reported their third-quarter profit. And it dropped just 6.3%, says FactSet. That may not sound great. But realize that on Sept. 30, analysts thought third-quarter profit would plummet 21% for the S&P 500.
And during the third quarter, S&P 500 revenue only dropped by 1.3%. That’s not bad if you consider entire sections of the economy shut down. S&P 500 energy companies’ revenue fell 35% in the third quarter. But revenue actually rose in five of the 11 S&P 500 sectors.
If anything, investors are hoping moves made to cut costs might boost profit at year’s end. Already, profit rose in five of the 11 S&P 500 sectors in the third quarter.
Looking To A Boom Fourth Quarter
So if the fourth quarter does improve, investors will look for explosive profit booms. And analysts are already picking their favorites.
One example is gold miner Freeport-McMoRan. The company is expected to post a fourth-quarter profit of $467 million, or 29 cents a share. That’s up 1,365% from the same period last year when it made just two cents a share.
Investors are piling into the stock ahead of the report. Shares of Freeport-McMoRan are up more than 62% this year and 23% just in November. No wonder it has a perfect 99 IBD Composite Rating.
GM is another example of a profit boom coming. Analysts think the company will make $1.95 a share in the fourth quarter, or $2.9 billion. If right, that’s up 3,804% from the fourth quarter last year when it only made 5 cents a share. Investors, including millennials, pushed GM’s stock up 25% just in November so far. GM shares, carry an IBD Composite Rating of 85, and are up 18% this year.
So, more S&P 500 profit pain is likely coming. But at least it will be softened with good news.
Fourth-Quarter Profit Seen Jumping At These S&P 500 Companies
| Company | Symbol | Stock % Ch. In November | Q4 % EPS Growth (est.) | Sector | Composite Rating |
|---|---|---|---|---|---|
| NRG Energy | (NRG) | -3.4% | 82,091.8% | Utilities | 25 |
| General Motors | (GM) | 24.6% | 3,804.3% | Consumer Discretionary | 85 |
| Freeport-McMoRan | (FCX) | 22.5% | 1,365.3% | Materials | 99 |
| Weyerhaeuser | (WY) | 5.3% | 1,147.3% | Real Estate | 57 |
| TechnipFMC | (FTI) | 49.4% | 539.9% | Energy | 16 |
| Wynn Resorts | (WYNN) | 31.6% | 262.1% | Consumer Discretionary | 31 |
| Hologic | (HOLX) | 0.2% | 251.1% | Health Care | 95 |
| Live Nation Entertainment | (LYV) | 35.9% | 170.0% | Communication Services | 46 |
| Laboratory Corporation | (LH) | 1.5% | 144.5% | Health Care | 96 |
| Qualcomm | (QCOM) | 18.4% | 109.6% | Information Technology | 98 |
| PerkinElmer | (PKI) | 0.5% | 105.1% | Health Care | 98 |
| Newmont | (NEM) | -1.9% | 103.6% | Materials | 82 |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
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