Earnings season will be a good time for most S&P 500 companies for the third quarter. But a few are in for a rough ride.
The Street expects 10 S&P 500 companies, including Albemarle, Intel and Southwest Airlines will report drops of 70% or more in third-quarter profit. That's according to an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSurge. Such poor results are a reminder that while the S&P 500's rally is broadening to include more stocks, investors still need to watch out for land mines.
"The wait is over for earnings watchers, as the latest quarterly read on U.S. corporations kicks off with reports from JPMorgan Chase and Wells Fargo," said Christine Short of Wall Street Horizon. "Earnings will provide a gut check on the state of the U.S. economy, and investors will be looking for these results to confirm the mostly improving economic data that's been released in the last month or so."
Shaping Up To Be Solid Quarter For Most On S&P 500
Analysts have lowered their expectations for the third quarter. But they're still looking for decent growth — making those shrinking companies stand out even more.
S&P 500 companies as a group are expected to post 4.2% earnings growth in the third quarter, Short says. And that comes with 4.7% expected revenue growth for the quarter.
Some stocks, though, will likely fall short of that kind of growth.
Biggest Profit Disappointments
Materials firm Albemarle is on deck to be the hardest hit in the quarter.
Analysts think the specialty-chemicals company will post a quarterly loss of 29 cents a share. That's down from a profit of $2.74 in the same year-ago period. The company is struggling with rapidly falling lithium prices, which is one of the key chemicals it sells. Demand for lithium was expected to be strong as it's a key ingredient used in rechargeable batteries. Slow EV sales have shrunk demand for lithium. Shares are down 29% this year.
Falling chipmaker Intel is another ugly report coming. Analysts think the company will lose nearly 3 cents a share in the quarter, down from a gain of 41 cents a share in the same year-ago period. No wonder the stock is down 54% this year and has a rock-bottom Relative Strength Rating.
Meanwhile, S&P 500 stock Southwest Airlines is still a target of activist investors. And the third quarter isn't going to help it much. Analysts think it will make just a penny a share, down nearly 97% from the same year-ago period. Shares are up 5% this year.
All these big drops in profit again show the importance of sticking with the S&P 500 leaders.
Biggest S&P 50o Profit Drops
Based on estimates for third quarter of 2024
| Company | Ticker | YTD | EPS 3Q 2024 decline | Sector |
|---|---|---|---|---|
| Albemarle | ALB | -29.0% | -110.5% | Materials |
| Intel | INTC | -54.1% | -106.5% | Information Technology |
| UDR | UDR | 13.1% | -100.0% | Real Estate |
| Southwest Airlines | LUV | 5.0% | -96.8% | Industrials |
| Valero Energy | VLO | 9.6% | -85.3% | Energy |
| Marathon Petroleum | MPC | 11.5% | -83.8% | Energy |
| Weyerhaeuser | WY | -6.1% | -82.7% | Real Estate |
| Moderna | MRNA | -42.9% | 80.1% | Health Care |
| Microchip Technology | MCHP | -14.6% | -73.2% | Information Technology |
| Take-Two Interactive | TTWO | -4.9% | -70.7% | Communication Services |
