The anticipation around quarterly earnings can often feel akin to the buildup before a sporting event. The excitement among investors is palpable, with expectations running high, particularly when tech giants are involved. However, as the third-quarter earnings season approaches, analysts have begun to express cautious sentiments regarding specific companies. While big tech firms such as Apple and Microsoft are largely seen as the engines driving growth for the S&P 500, a deeper dive reveals that the forecast for many corporations is considerably less encouraging.
As of mid-week, around 42% of S&P 500 companies had issued their earnings reports, yielding an impressive collective growth rate exceeding 6%, a statistic highlighted by FactSet. This initial wave of reporting has instilled a sense of confidence among some investors, yet the anticipated blended growth—factoring in estimates for future reports—paints a more tempered picture, suggesting a growth rate near 4.89%. This juxtaposition underscores the variability prevalent in the current market landscape and the necessity for investors to remain vigilant.
In light of this mixed performance, CNBC Pro has conducted a review of FactSet’s data, identifying several companies whose stocks are facing downward revisions in earnings projections. Particularly, AIG and CVS Health have caught the attention of analysts who are expressing decreased confidence in these stocks. These companies, both constituents of the S&P 500, have seen considerable downgrades in their earnings per share estimates; a noteworthy shift that signals potential obstacles on the horizon.
For AIG, the data reveals a concerning trend where analysts have reduced their earnings expectations by nearly 30% in the last quarter alone. This pattern raises alarms when combined with BMO Capital Markets’ recent downgrade of AIG stock from ‘outperform’ to ‘market perform.’ Industry analyst Michael Zaremski has indicated that AIG is likely to struggle to keep pace with competitors in the insurance arena, attributing this to broader market challenges.
Furthermore, the agriculture segment isn’t exempt from these declining projections. Archer-Daniels-Midland (ADM) has witnessed its stock plummet over 21% this year, as estimates for its earnings have also been adjusted downward—by 21% in three months and an alarming 29% over the last six months. Compounding these issues, ADM found itself in legal hot water due to allegations regarding safety protocol failures at one of its carbon capture facilities. Such controversies only serve to exacerbate investor apprehensions, particularly when a company’s operational integrity comes into question.
Emphasizing the diversified range of affected stocks, chemical firms such as Albemarle and Corteva also found their names included in the list of companies projecting weaker future earnings. The struggles faced by various sectors reinforce the notion that while some companies are thriving, the broader market remains uneven.
As technology firms report their earnings in the coming weeks, investors must brace themselves for potential disruptions from these companies exhibiting concerning trends. The overall growth narrative within the tech sector may persist, but the undercurrents of skepticism—evident in the reduced earnings expectations—demand a cautious approach. Investors are tasked with carefully weighing risk against opportunity as they navigate this pivotal moment in the financial landscape.