Brace yourself for lots of highs and lows when it comes to first-quarter S&P 500 earnings results. The spread between the haves and have-nots will be large enough — you'll want to be on the right side.
Analysts expect blowout first quarter profit growth from 11 S&P 500 companies, including casino operator MGM Resorts, utility NRG Energy and energy firm Marathon Petroleum, says an Investor's Business daily analysis of data from S&P Global Market Intelligence and MarketSmith. All these companies are expected to report quarterly first-quarter profit that's up 144% or more from the same year-ago period.
Looking Into The S&P 500's First-Quarter
Anytime a company can double profit that's noteworthy. But it's outright stunning given the rough shape most of the S&P 500 is in.
Companies in the S&P 500 are expected to post a 6.6% drop in first-quarter profit, says John Butters of FactSet. If that's what actually happens, it would mark the biggest earnings drop since falling nearly 32% in the second quarter of 2020.
Even more concerning, though, is the fact analysts are slashing their profit forecasts with a vengeance. They've cut estimates on S&P 500 profit by 6.3% since December, Butters says.
"Wall Street analysts have been cutting their first quarter 2023 S&P 500 earnings estimates by more than usual, but it remains unclear if these cuts have been deep enough to reflect reality," says Nicholas Colas of DataTrek Research.
And it's hard to avoid the pessimism. "Only three sectors (consumer discretionary, industrials, energy) are expected to show earnings growth higher than inflation, and those three groups have also been subject to the largest negative estimate revisions," Colas said.
And that's why investors might want to know the kinds of S&P 500 companies with earnings power at their backs.
S&P 500 Profits In Vegas
If you're wondering what people are doing now that the pandemic's effects are easing, just think of Vegas. And analysts think the first quarter for many companies there was stunning.
MGM Resorts is expected to post 929% higher profit in the first quarter of 2023. That's a higher growth rate seen coming from any other S&P 500 stock. The company, which runs several properties both on the Las Vegas Strip and in China, is expected to make 10 cents a share in the first quarter, up from a penny-a-share gain in the same period in 2022.
And the comeback story is a powerful one. Analysts think the company will make $282 million this year, or 75 cents a share. If that happens, it would reverse part of the company's massive $1.1 billion, or $2.74 a share, loss in 2022. Investors aren't wasting any time plunking their cash down on this runaway winner. Shares of MGM are already up more than 30% this year.
Growth From Utilities And Energy?
Given that oil prices remain fairly elevated, it's not a huge surprise to see strong growth still coming the S&P 500 energy sector.
Four of the 11 S&P 500 companies forecast to put up the highest earnings growth in the first quarter are in the energy sector. That's a higher representation than any of the other 11 S&P 500 sectors. And topping them all is Marathon Petroleum. The company is seen making $5.48 a share in the first quarter, up 278% from the same period last year. Shares of Marathon Petroleum are up more than 16% this year.
But it's not just speculative energy stocks seeing big bumps in profits. NRG Energy, a traditional power company in Houston, is widely seen delivering profit of $1.20 a share in the first quarter. That's up more than 435% from the same year-ago period. That's even higher than the growth rate predicted for fast-growing energy firms. The stock is up 6.5% this year, not to mention its market-beating 4.4% dividend yield.
So while many S&P 500 investors might be cringing over the next few weeks fearing a big slowdown in profit, investors in some stocks have lots to look forward to.
Analysts: The S&P 500 Biggest Profit Gainers
Companies seen putting up 100% or greater adjusted profit per share in the first quarter
| Company | Ticker | First-quarter EPS % ch. (estimate) | Sector |
|---|---|---|---|
| MGM Resorts | 928.6% | Consumer Discretionary | |
| NRG Energy | 435.7% | Utilities | |
| Marathon Petroleum | 278.4% | Energy | |
| Albemarle | 205.3% | Materials | |
| Valero Energy | 181.5% | Energy | |
| Booking Holdings | 176.2% | Consumer Discretionary | |
| Phillips 66 | 160.2% | Energy | |
| ONEOK | 160.2% | Energy | |
| Martin Marietta Materials | 155.7% | Materials | |
| UDR | 144.6% | Real Estate | |
| Ceridian HCM Holding | 143.0% | Information Technology |
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on Twitter @mattkrantz
