If you think S&P 500 second-quarter earnings season is only about Big Tech stocks — you're only partly right. One of the biggest contributors to growth isn't a tech play after all.
Recovering drugmaker Merck is expected to be among the top-five largest contributors to S&P 500 earnings growth, says FactSet. That puts Merck right up there among members of the Magnificent Seven in powering this earnings season. The four Magnificent Seven stocks also seen in the top five of earnings growth contributors are Nvidia, Amazon.com, Meta Platforms and Alphabet.
"Are companies in the Magnificent Seven also expected to drive earnings higher for the S&P 500 for the second quarter? The answer is yes," said John Butters of FactSet. "Four of the companies in the Magnificent Seven are projected to be among the top five contributors to year-over-year earnings growth for the S&P 500 for (the second quarter)."
What's Going On At Merck?
Why is Merck seen being such a profit contributor this quarter? It's not due to some new blockbuster drug or treatment. It's simply due to a healthy bounce from a dismal year-ago period.
Analysts think the company will earn $2.16 a share in the quarter. That's massive growth from the company's $2.06 a share loss in the same year-ago period. But again, it's just a comeback from the dumps. The stock sports a middling IBD Composite Rating of 49 out of 99. And its EPS Rating is just 44.
Why The Magnificent Seven Are So Exciting
Given the weak IBD ratings on Merck, it's much easier to understand the enthusiasm for the Magnificent Seven.
Just look at Nvidia. Not only is it seen being the No. 1 contributor to the S&P 500's earnings growth in the quarter, the IBD numbers are solid. It sports a perfect 99 Composite Rating and 99 EPS rating.
The AI company is expected to make 64 cents a share in its July quarter, up nearly 140% from the same period a year ago.
And that's truly magnificent.
Biggest Contributors To S&P 500 Second-Quarter Profit Growth
Most, but not all, hail from the Magnificent Seven
| Company | Symbol | YTD | EPS est. second quarter |
|---|---|---|---|
| Meta Platforms | 34.4% | 4.70 | |
| Merck | 14.0% | 2.16 | |
| Alphabet | 27.2% | 1.83 | |
| Amazon.com | 20.9% | 1.02 | |
| Nvidia | 144.5% | 0.64 |
