(MarketWatch) - Even as fretting over the economy remains a pastime on Wall Street, third-quarter corporate profit growth has held up, helped by big banks and Big Tech.
With third-quarter earnings season more than halfway done, per-share profit growth is trending at 10.7% for the companies in the S&P 500 Index SPX, according to a FactSet report on Friday. If that figure holds, it would be the fourth straight quarter of double-digit year-over-year earnings growth, the report said.
The last time those companies had those kinds of gains, for that long of a stretch, was the four quarters of 2021, according to the report, as the economy reopened from pandemic lockdowns, leading to supply disruptions and, at times, lopsided profits.
Around two-thirds of the companies in the index have reported third-quarter results so far, the report said. And 83% have beaten earnings-per-share estimates.
Matt Stucky, chief portfolio manager of equities at Northwestern Mutual Wealth Management, said that heading into the third-quarter earnings season, the market was pricing in something of a slowdown from the second quarter.
“One of the reasons why markets have been so resilient throughout this earnings season is just you’ve had better-than-expected reports collectively, and it’s not just within technology, it’s been broad-based,” he said.
So far, the financial industry has been the biggest contributor to the bump in earnings since Sept. 30, according to FactSet. A boost in trading and a deeper deals pipeline helped results for banks like Morgan Stanley MS and Goldman Sachs GS.
Still, the presence of Big Tech, which has done the heavy lifting for the market for the past two years, was hard to miss. Results from Microsoft Corp. MSFT, Apple Inc. AAPL, and Amazon.com Inc. AMZN continued to be big drivers for profit growth, helped by cloud-computing and, for Apple, an optimistic outlook for iPhone demand.
While profit growth has stayed strong, concerns about inflation, tariffs and a potential AI bubble have hung over the economy, and the job market has been stuck in a state of “no-hire, no-fire.” Analysts have differing views on the state of that job market, following cuts from UPS UPS, Amazon and Target Corp. TGT.
Even as the government shutdown drags on, depriving the market of data, Wall Street will get more color on the broader backdrop over the next week, which, like the last one, will be packed with earnings. During the week ahead, 136 S&P 500 companies are set to report results.
Earnings from McDonald’s Corp. MCD, Papa John’s International Inc. PZZA, and Wendy’s Co. WEN will offer an update on a fast-food landscape marked by discount wars and struggles among low-income customers. Coffee chain Dutch Bros Inc. BROS will deliver results after its larger rival, Starbucks Corp. SBUX, put up a surprise same-store sales gain.
Elsewhere, results are due from Warner Bros. Discovery Inc. WBD, which is weighing a possible sale following struggles in the entertainment industry. Theme-park chain Six Flags Entertainment Corp. FUN reports, after an activist investor joined forces with NFL star Travis Kelce to agitate for change there. Ticketmaster parent Live Nation Entertainment Inc. LYV also reports, amid strong concert demand and more government scrutiny.
DoorDash Inc. DASH, Lyft Inc. LYFT, E.l.f. Beauty Inc. ELF, Snap Inc. SNAP, Tapestry Inc. TPR, Airbnb Inc. ABNB, Planet Fitness Inc. PLNT, Peloton Interactive Inc. PTON, Grindr Inc. GRND and Monster Beverages Corp. MNST also report.
By Bill Peters
Emily Bary contributed reporting
