Third-quarter earnings season is underway, and a FactSet report Friday forecast a 4.1% third-quarter earnings growth rate for S&P 500 companies. But this number would climb to more than 7% if companies including Nvidia, Alphabet and Meta Platforms beat expectations.
That's how much is riding on just a few major companies, even as market leadership broadens.
Actual S&P 500 company earnings have topped estimates an average of 5.5% over the last four quarters. If third-quarter results act similarly, the growth rate could rise to more than 7%.
But not all 11 S&P 500 sectors are expected to be equal. The top three sectors are forecast to be Information Technology, Communication Services and Heath Care.
Nvidia Stock To Lift Tech Sector
And it's probably no surprise that Information Technology's earnings growth rate is expected to lead all 11 S&P 500 sectors with a 14.9% rise, getting a major boost from Nvidia.
The artificial intelligence computing leader's fiscal Q3 profit is forecast to rise 84% to 74 cents a share from the year-ago period. Excluding Nvidia earnings, the Information Technology sector's earnings would drop to half that amount. Nvidia is expected to report its results on Nov. 20.
Nvidia is nearing the 140.76 buy point of a late-stage base, according to IBD MarketSurge pattern recognition. Shares have climbed 178% so far this year.
Nvidia stock rose 2.4% Monday and closed at a record high. Nvidia stock is on the IBD 50, Leaderboard and SwingTrader.
Google, Meta Lead Communications Sector
The next heavy-hitting sector is Communications Services, which is predominantly Alphabet and Meta Platforms. FactSet calls for the sector to lift 10.3% in Q3, but the number sinks to 3.6% if the two Magnificent Seven names are excluded.
Alphabet's Q3 earnings per share are forecast to grow nearly 19% to $1.84 from $1.55. The company reports its Q3 earnings results on Oct. 29.
Alphabet stock is in an undefined base with a 191.75 buy point. The stock reclaimed its 50-day moving average and is climbing back to a potential resistance level around 169.
Next is Meta Platforms. Analysts see third-quarter EPS rising 18% to $5.19 from $4.39 in 2023. Meta reports its third-quarter results on Oct. 30.
The Facebook parent is extended from a buy zone of a 542.81 buy point. Shares reached the 600 level Monday before fading and closing at 590.42.
Health Care Rides On Just Three Companies
Rounding out the top three sectors is Health Care, with an expected 10% Q3 earnings jump. Two names lifting the sector are Pfizer and Eli Lilly.
Moderna is expected to post a loss much smaller than in the year-ago quarter, which also brightens the sector's profit picture.
Both Pfizer and Eli Lilly are trying to capitalize on the popularity of weight-loss drugs. Eli Lilly makes obesity drug Zepbound, while Pfizer is testing its danuglipron drug.
FactSet's Pfizer Q3 consensus estimate shows earnings of 59 cents per share vs. a loss of 17 cents one year ago. Pfizer stock is in a flat base with a 31.54 buy point, but an early entry can be seen at 30.35. The stock holds a 30 IBD Relative Strength Rating and is nearly flat on the year.
Nvidia Stock Not The Only One Near New High
Eli Lilly's estimates show Q3 profit climbing to $4.42 a share from a meager 10 cents a year ago. It reports its Q3 financial results around Oct. 30. Shares are in a flat base with a 972.53 buy point, which is also its all-time high.
Moderna is the dud of the three with its estimated loss of $1.85 per share in Q3. Yet that's a big improvement from a year-ago loss of $9.53 per share.
Take away Moderna, Eli Lilly and Pfizer earnings, and the Health Care sector's profit goes from a year-over-year gain of 10% to a decline of 7.8%, FactSet calculates.
Moderna's chart is weak as the stock sank to a 52-week low Monday. Shares have lost around 42% so far this year.
On the other end of the spectrum is the Energy sector, with an expected earnings decline of 24.3%.
Follow Kimberley Koenig for more stock market news on X/Twitter @IBD_KKoenig.
