Earnings Should Rise 19.5% in 2nd Quarter, Says Sam Stovall

Second-quarter earnings aren’t expected to be as robust as last year’s or the 2018 first period’s. But they should be pretty decent, according to Sam Stovall, the CFRA chief investment strategist, and his team.

That means a 19.5% increase in earnings per share for the second quarter, Stovall wrote in a research report. For the quarter, earnings are projected to be positive for nine of the 11 S&P 500 sectors, with utilities and real estate dipping. In this year’s first quarter, the S&P 500 increase was 23.3%, partly powered by still-strong performance in Europe. But Europe since then has cooled down.

The big second-quarter winner is expected to be energy, once again, ahead a whopping 140.5%. Stovall forecasts that the sector should continue to prosper thanks to surging oil prices—per-barrel, West Texas Intermediate oil is now around $68, up 40% from 12 months before. Domestic refining operations benefit from the gap between WTI crude and more expensive Europe-based Brent fuel.

Financials will be the second-biggest gainer, he contended, up 22.5%. This is the fruit of rising net interest margins as short-term rates increase (those for deposits aren’t advancing so much).

Information technology, long the king of the stock market, should be in third place, with a 21.5% boost, Stovall indicated, because the start of summer is usually a slow time for the industry. Aside from that seasonal factor, he warned, a stronger dollar may crimp international sales of US tech goods and services, as well as a mounting wall of tariffs that are rising worldwide in response to President Donald Trump’s trade barriers.