Earnings season plays: Profit expectations are growing for these stocks while their valuations get cheaper

Wall Street analysts are raising earnings estimates for a host of stocks that have seen slumping share prices, leaving more attractive valuations heading into second-quarter earnings season. Nicole Inui, head of Americas equity strategy at HSBC Global Investment Research, said expectations for the quarter are high but concentrated in sectors where earnings visibility is relatively strong. She sees opportunities beyond the artificial intelligence trade, including companies that could benefit from tariff refunds and spending tied to the FIFA World Cup. Consensus estimates call for S & P 500 EPS to rise 22% from a year earlier, the strongest growth since the post-pandemic period. Historically, companies that beat earnings estimates see only modest stock gains, while those that miss tend to fall more sharply. Still, Inui is not overly concerned because much of the quarter’s expected earnings growth is forecast to come from energy, semiconductor and tech hardware suppliers, where earnings are more predictable. Outside those areas, her analysis shows that earnings are expected to grow about 5%, far below the roughly 24% seen in the first quarter. Energy and tech lead Energy and information technology are expected to lead, according to FactSet data used by HSBC, logging EPS growth of 122% and 61%, respectively, The Mag 7 (Amazon, Alphabet, Microsoft, Tesla, Nvidia, Meta Platforms and Apple) as a group are expected …

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