You'd think Nvidia's expected 226% jump in profit this year can't be beat. But two S&P 500 companies not even in tech — much less AI — are seen boosting profit by more.
Two airlines, American Airlines and United Airlines, are expected to boost adjusted earnings per share by 367% and 288%, respectively, this calendar year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Such earnings growth from unexpected places would be an apt wrap-up to the year. Rather than just relying on the "Magnificent Seven" tech stocks like Nvidia, other S&P 500 sectors are joining in.
"Corporate earnings are coming in better than projected, and growth expectations are strong for the next quarter," said Brad McMillan, chief investment officer for Commonwealth Financial Network.
Looking For S&P 500 Profit Growth
Investors are hoping the stronger-than-expected third quarter for S&P 500 profit can continue. If so, stock prices will look even more reasonable.
And that's the story right now. The S&P 500 is currently trading for 17.8 times expected earnings in the next 12 months, says John Butters of FactSet. That's slightly cheaper than the market's 18.7 times forward earnings valuation in the past five years on average.
But analysts are playing it safe for now. Currently, analysts think S&P 500 profit will only rise 0.6% for all of 2023. In fact, analysts now think S&P 500 earnings will only rise 3.9% in the pivotal fourth quarter, down from the 8.1% growth they expected in September.
But there will definitely be some outliers.
Airline Profit Growth Takes Off
Customers cooped up during the pandemic continue to take to the skies. And some airlines' profit is taking off with them.
American Airlines is expected to make an adjusted $2.33 a share in calendar 2023. That's up a mind-boggling 367% from the same period a year ago. Currently, the company is slated to report its end-of-year results on Jan. 24. Investors, though, continue to hold back. Shares of the airline are down nearly 8% this year.
Similarly, shares of United Airlines are down 1.7% this year. And that's despite the fact the company is expected to make $9.77 a share in 2023. That would be profit growth of more than 287%. The airline is seen reporting on Jan. 16. "Even in a tough industry environment, we're producing strong absolute results while producing the best relative results in our history," CEO Scott Kirby said in a call with investors.
Going For A Profit Double
It would be overly simplistic, though, to suggest only two airlines and Nvidia are boosting profits this year. All told, eight stocks in the S&P 500 are expected to at least double their adjusted profit this year.
And that includes utilities, which Morningstar still thinks are the biggest opportunities in this market. NRG Energy, for instance, is expected to boost adjusted earnings per share this year by 175% to $4.81.
There's no doubt investors have plenty to worry about. But profit growth isn't a top concern if you're looking in the right places.
Top S&P 500 Profit Growth In 2023
| Company | Ticker | Sector | 2023 EPS ch. % (est.) |
|---|---|---|---|
| American Airlines | Industrials | 367.0% | |
| United Airlines | Industrials | 287.5% | |
| Nvidia | Information Technology | 226.3% | |
| NRG Energy | Utilities | 175.1% | |
| Airbnb | Consumer Discretionary | 163.7% | |
| Allstate | Financials | 161.8% | |
| Live Nation Entertainment | Communication Services | 124.1% | |
| Everest Group | Financials | 101.8% |
