Posting 150% quarterly profit growth is impressive anytime. But it's especially head-turning when the rest of the S&P 500's profit is seen dropping 7.1% — extending a profit recession.
And yet that's what analysts are expecting from eight stocks in the S&P 500, including consumer discretionary firms MGM Resorts and Aptiv, and energy firm Targa Resources, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
The time to pay attention to profit anomalies is now — as S&P 500 companies start reporting their second-quarter profit results in coming weeks. Investors love what they see from those able to boost their bottom lines. Shares of these eight fast-growth companies rocketed an average 42% this year, topping the S&P 500's roughly 17% rise.
Seeing huge profit growth forecasts in the S&P 500 for the second quarter is a break from the overall earnings malaise. S&P 500 profit is expected to plunge more than 7% — "the third straight quarter the index has reported a decline in earnings," said John Butters, earnings analyst for FactSet.
S&P 500 Profits To Fall
Analysts are prepared for a drop in S&P 500 profits in the June-ended quarter. And they blame primarily five of the 11 S&P 500 sectors for the downfall.
For instance, profit from the energy sector is expected to drop 49.6%, FactSet says. That's the largest anticipated decline by any of the sectors. "Lower year-over-year oil prices are contributing to the year-over-year decrease in revenues for this sector, as the average price of oil in Q2 2023 was 32% below the average price for oil in Q2 2022," Butters said.
Materials companies, too, are seen posting a 33% drop in profit. Even information technology companies' profit is expected to fall 3.6% during the quarter.
But you can still find S&P 500 companies putting up earnings growth in the second quarter.
What Happens In Vegas? Big Profit
MGM Resorts is enjoying a windfall from the sudden boom in traveling. It operates casinos and convention halls in Las Vegas and Macau.
And profit is surging back with a vengeance. Analysts think the company will earn more than 50 cents a share in the second quarter. If correct, that would mark 1,586% profit gain during the period, vs. the same period a year earlier.
Keep in mind, too, with travel coming back so furiously, those numbers might prove too cautious. The company blew away analysts' profit forecasts in the first quarter by 175%. No wonder shares of MGM are up nearly 50% this year. MGM reports second-quarter profit on Aug. 2.
And just a day later, on Aug. 3, another big winner for profit gains is seen as reporting. Targa Resources, an energy firm, is expected to post 1,217% higher second-quarter profit of $1.12 a share. That's doubly impressive, given how hard profit in its sector is seen falling. That helps explain why shares of Targa are up nearly 7% this year, while most energy stocks are down.
It's a similar story at vehicle safety gear maker Aptiv. Strong auto sales should power a 355% jump in second-quarter profit to $1 a share, analysts say. Shares of the company are up nearly 17% this year.
Preparing for an S&P 500 profit recession might be reality for most investors. But if you choose wisely, it's more than possible to sidestep it.
Profit Is Booming At These S&P 500 Companies
Where analysts expect the highest second-quarter profit jumps
| Company | Ticker | Expected earnings gain | Sector |
|---|---|---|---|
| MGM Resorts | 1,585.8% | Consumer Discretionary | |
| Targa Resources | 1,217.1 | Energy | |
| Aptiv | 355.3 | Consumer Discretionary | |
| Nvidia | 304.8 | Information Technology | |
| Target | 296.7 | Consumer Staples | |
| Baker Hughes | 203.2 | Energy | |
| United Airlines | 183.1 | Industrials | |
| SolarEdge Technologies | 167.7 | Information Technology |
