If you think companies in your portfolio are doing poorly, just wait. Some S&P 500 companies are set to get some really bad news in the next couple of weeks.
The pivotal second-quarter earnings season just kicked off, and analysts see massive drops in profit coming to companies like Boeing, Caesars Entertainment and Amazon.com, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. All these companies' adjusted profit per share is expected to fall 60% or more in the second quarter.
And that's exactly what the S&P 500 doesn't need right now. The market is already down more than 20% this year as investors fear a recession might already be underway.
"Inflation has taken a bite out of the stock and bond markets — and the bite may not be over quite yet," said Liz Young, strategist at SoFi. "As we await the Q2 earnings data, we also await the Fed's next move on July 28, which could be a big one. I view these next two Fed meetings as the ones that will convince markets once and for all whether or not we could see a classic recession in the next 12 months."
But the pain is just about here already for some S&P 500 stocks.
S&P 500 Investors Brace For Rough Second Quarter
If the mostly disappointing second-quarter results from banks are any indication, the next few weeks could be rough for the S&P 500.
Already, more than half of the 4% of S&P 500 companies reporting how the quarter went warned about a bite from higher labor costs, says John Butters, earnings analyst at CFRA. All told, analysts think S&P 500 companies will report only 4.3% higher profit in the quarter. If that's right, it would be the lowest quarterly profit growth since the fourth quarter of 2020, Butters says.
But the biggest drops are still to come.
Boeing's Profit To Crash
You'd think having a near monopoly on making large-body planes would be a license to print more money. But that's not the case for Boeing in the second quarter, if analysts are right.
They're calling for the aircraft maker to actually lose 7 cents a share on an adjusted basis. That's a shocker, as air travel had been picking up this year. But still, it's a massive reversal from the 40 cents a share Boeing earned in the same year-ago period. No wonder shares of Boeing are down nearly 27% this year.
A bad hand is also being dealt to another travel-related company: Caesars Entertainment. Despite hopes that the gaming scene would pick up in 2022, analysts think the company will make only 7 cents a share in Q2 2022. That's a drop-off of more than 93%. Again, investors saw this coming a mile away. Shares of Caesars are down more than 40% this year.
Amazon.com In A Recession?
Investors debating if an S&P 500 recession is here already won't have to wonder much longer with Amazon. The online shopping giant is in major retrenchment mode. Analysts think its second-quarter profit will drop nearly 80% to an adjusted 16 cents a share. Shares lost a third of their value this year in anticipation. And this was an S&P 500 stock every fund manager had to own just a year ago.
Some are hopeful the second quarter will be the worst of the slowness. "(The second quarter) should mark the trough in terms of profitability," said CFRA's Arun Sundaram on Amazon. "Cost inflation should moderate in (the second half) as comps get easier. Additionally, progress should be made to improve recent operational issues."
Maybe so. And it's possible that these expectations are so low, they're easy for the companies to beat. But odds are, some S&P 500 investors must still endure a rough quarter.
Bad News For S&P 500 Stocks
Adjusted profit in the second quarter of 2022 is seen dropping 60% or more
| Company | Ticker | Adjusted EPS Q2 drop (estimate) | Sector | Stock YTD change |
|---|---|---|---|---|
| Boeing | -118.6% | Industrials | -26.9% | |
| Warner Bros. Discovery | -93.2 | Communication Services | -42.1 | |
| Caesars Entertainment | -84.4 | Consumer Discretionary | -62.2 | |
| Allstate | -80.5 | Financials | 2.8 | |
| Target | -79.7 | Consumer Discretionary | -36.8 | |
| Amazon.com | -78.3 | Consumer Discretionary | -33.6 | |
| Healthpeak Properties | -77.5 | Real Estate | -28.4 | |
| Vornado Realty Trust | -70.4 | Real Estate | -31.5 | |
| Illumina | -65.5 | Health Care | -53.4 | |
| Regeneron Pharmaceuticals | -62.4 | Health Care | -5.2 |
