Third-quarter earnings reporting season is quickly approaching, just a few weeks away.
That’s when S&P 500 companies report their results for the third quarter, which just ended. I’m expecting plenty of big earnings surprises (click here now to cash in).
The reason for these earnings surprises is simple: Companies are raising their earnings guidance as their profit outlook improves.
Remember, second-quarter profit results turned out to be a lot better than expected. We had more positive earnings surprises than negative surprises. And profits beat estimates by a very wide margin.
Of the 67 S&P member companies that have issued earnings guidance for Q3 2020 so far, 45 have issued positive EPS guidance. That is, they are expecting to post profits that are BETTER than current Wall Street estimates.
This number is 36% above the five-year average, which means a big jump in the number of companies that see improving sales and profits.
In fact, third-quarter results are on track to tie Q2 2010 and Q2 2018 for the second-highest number of S&P 500 companies issuing positive guidance for a quarter since FactSet began tracking this stat.
As you can see in the chart above, the biggest positive earnings guidance is coming from the technology sector. No surprise there. But Health Care, Industrials, Materials and Consumer Services are likewise posting big increases in upward earnings guidance.
That’s a very bullish sign for the upcoming third-quarter earnings reporting season, indicating even more positive profit surprises, which should give stocks a boost.
My colleague Andy Crowder developed an earnings season strategy that can put you in position to profit from these earnings surprises. In fact, this strategy is up 224.4% this year alone!