Sectors You Should Look in to Get High Earnings Growth in 2015

The fourth quarter earnings reporting season is here.

Alcoa has kicked things off reporting 33 cents a share in fourth quarter EPS.

This exceeds consensus analysts’ forecasts by 5 cents a share or 18%.

The aluminum producer has provided a comforting 2015 outlook.

The company forecasts global aluminum demand to grow 7% in 2015, mirroring the 7% growth in 2014.

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

Here is how 2015 EPS growth expectations stack up across different sectors.

earnings-EPS-growth-forecasted-in-2015-by-sector

Source: FactSet Research

Analysts expect S&P 500 companies to grow EPS by 7.8% in 2015 compared to 4.9% in 2014.

All sectors are forecasted to grow EPS in 2015 except energy.

The relentless slide in oil prices has taken a toll on earnings expectations in the energy sector. Earnings here are now forecasted to decline 23.5%, a sharp reversal from the 7.0% growth expected at the end of 2014’s third quarter.

Double-digit growth in EPS is expected in five sectors. They are consumer discretionary, financials, materials, information technology, and health care.

Consumer’s disposable income stands to rise from a drop in oil and gasoline prices. This in turn is expected to benefit companies in the consumer discretionary sector.

Companies in the consumer discretionary sector are forecasted to grow earnings by 17.5% on average, the highest among all sectors.

Among S&P 500 consumer discretionary sector members, home improvement retailers Lowe’s (LOW) and Home Depot (HD) are expected to grow EPS by 24.6% and 17.4%, respectively in the next four quarters.

Likewise, specialty eatery Starbucks (SBUX) and media giant Twenty-First Century Fox (FOXA) are two other consumer discretionary sector members expected forecasted to grow EPS double-digits.

Should investors conclude consumer discretionary stocks are likely to fare well in 2015 while energy 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 how 2015 EPS growth forecasts from each company compares against expectation, how its actual EPS stacks up against forecasts as the year progresses, 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 & selecting winning Fidelity Select Funds.

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

This analysis ensures investments in the chosen sector are attractively priced and have the catalysts needed to sustain growth in future.

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