Sector Funds to Invest in 3Q 2014 Earnings Report Season

Earnings growth expectation is among the more important factors influencing the course of stock prices.

With that in mind, here is how third quarter EPS growth expectations are currently lining up:


Source: FactSet Research

Analysts’ consensus third quarter EPS estimates imply 4.6% growth for S&P 500 companies in aggregate.

Third quarter EPS in all sectors is predicted to be higher than a year-ago except consumer discretionary. PulteGroup (PHM) is the culprit here. Excluding this homebuilder, the consumer discretionary sector’s EPS growth would turn positive to 1.9%.

At the other end of the spectrum, telecommunication is predicted to show the highest growth rate in third quarter EPS. This sector’s statistics benefit substantially from the 20.8% growth forecasted in Verizon Communication’s (VZ) EPS.

Double-digit growth in EPS is expected in two more sectors: materials and health care. The financial sector’s forecasted EPS falls short of double-digits by just a whisker.

Should investors take this to mean telecommunication stocks are likely to fare well while consumer discretionary stocks are likely to lag?

Not entirely.

Stock price performance is influenced by a variety of other factors in addition to expected EPS growth. They include comparison of reported EPS versus expected EPS, financial forecasts for 4Q 2014 & beyond, valuation, and more.

AlphaProfit uses multi-factor analysis to reduce the risk of negative surprises and to increase the odds of selecting winning sector ETFs & Fidelity Select Funds.

AlphaProfit evaluates sectors on valuation, momentum, and news quality. EPS growth is one of the metrics analyzed in news quality.

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