Missed owning shares of S&P 500 companies that posted massive profit growth in the first quarter? Fear not: Analysts think some of them will do it again in this quarter.
Eight S&P 500 companies, including MGM Resorts, Baker Hughes and Booking Holdings, notched massive first-quarter profit growth of 50% or more, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Additionally, analysts expect them all to post 50% or higher growth again in the ongoing second quarter.
These companies prove stronger-than-expected profits in the first-quarter could continue into the second.
"First quarter earnings season is nearly complete," said Jeffrey Buchbinder, Chief Equity Strategist for LPL Financial. "While the 'better than feared' label fit the past couple of earnings seasons quite well, based on the magnitude of upside surprises in the first quarter, and encouraging guidance from corporate America, that's probably underselling it."
Where The Big Profit Growth Is Coming From
Finding big profit growth in the S&P 500 in the first quarter wasn't impossible.
In the consumer discretionary sector alone, the average profit growth was 53.6% in the first quarter, says John Butters of FactSet. That was the highest profit growth among all 11 S&P 500 sectors. And it's well above the 2.5% drop in the overall S&P 500's earnings in the period.
But if you looked further, you could find some even more stellar growth. Leading the charge higher is casino operator and consumer discretionary company MGM Resorts. The company notched first-quarter profit growth of more than 4,300%. But even more remarkable is that analysts think the same company's profit will surge another 1,609% in the second quarter. It's not surprising, as a result, to see the company's stock already up 25% this year.
And MGM Resorts is not alone in being expected to generate a powerful second-quarter of profit growth — even after already booming in the first quarter.
Other Big Profit Boomers Coming
The S&P 500 energy sector was another spot of profit growth in the first quarter. The sector's profit rose 14% during the period.
But that's nothing compared with the more than 86% profit growth put up by oil services firm Baker Hughes in the first quarter. And get this. That's just the beginning. Analysts think the company's adjusted profit per share will surge another 198% in the current quarter. However, big earnings growth from energy companies isn't as impressive in 2023 as it was in 2022. Shares of Baker Hughes are actually down 6.3% this year.
Booking Holdings, an online travel booking site, is turning heads. The consumer discretionary company generated nearly 200% profit growth in the first quarter as "revenge travel" following the pandemic remains a thing. But it's not just a first-quarter phenomenon. Analysts think the company's profit will rise another 51% in the second quarter. Shares are up nearly 31% this year.
Yes, many S&P 500 companies wowed investors in the first quarter with their results. But there might be another quarter where that came from.
Another Huge Profit Coming
S&P 500 companies seen posting 50% or higher second-quarter earnings growth after doing so in the first quarter
| Company | Ticker | First-quarter profit growth | Est. second-quarter profit growth | Sector |
|---|---|---|---|---|
| MGM Resorts | 4,300% | 1,609.8% | Consumer Discretionary | |
| Baker Hughes | 86.7 | 198.2 | Energy | |
| SolarEdge Technologies | 141.7 | 164.5 | Information Technology | |
| UDR | 110.2 | 103.4 | Real Estate | |
| Lamb Weston | 95.9 | 60.1 | Consumer Staples | |
| Paccar | 96.2 | 55.9 | Industrials | |
| Halliburton | 105.7 | 53.7 | Energy | |
| Booking Holdings | 197.4 | 51.0 | Consumer Discretionary |
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on Twitter @mattkrantz
