3 sectors to report explosive growth as fourth quarter earnings kick in

Wall Street's fourth-quarter earnings season kicks off this week, with banking giants JPMorgan Chase (NYSE:), Citigroup (NYSE:) and Wells Fargo (NYSE:) all set to release their latest financial results. to be published Friday morning. of the American session opened.

FactSet data shows that analysts expect fourth-quarter profits to rise 21.7% compared to the same period last year, mainly due to the diminishing impact of the coronavirus pandemic on several industries. If confirmed, the fourth quarter of 2021 would be the fourth consecutive quarter with earnings growth of more than 20%.

At the sector level, nine of the 11 sectors are expected to report Y-o-Y earnings growth, led by the Energy, Materials, Industry and Sectors sectors.

Note : The energy sector is expected to report a profit of $28.1 billion for the fourth quarter, a significant improvement from a loss of $0.1 billion in the challenging period from a year ago, when the COVID-19 health crisis crippled the economy. As such, no Y-o-Y equation is available.

Sales expectations are also promising, with sales growth expected to increase by 12.9% compared to the same period a year earlier. If confirmed, it will be the third-highest annual revenue growth reported by the index since FactSet began tracking this metric in 2008, trailing only in the previous two quarters. The current record is 25.3%, which occurred in the second quarter of 2021.

All 11 sectors are expected to report annual sales growth, led by the Energy, Materials and Industry sectors.

Below we break down three sectors whose financial results are expected to show exponential growth compared to the same period a year ago in the current market conditions.

1. Energy: Rising oil prices to boost results
Expected fourth quarter revenue growth: +66.9% Y-o-Y

The energy sector is expected to report a profit of $28.1 billion for the fourth quarter, a significant improvement from a loss of $0.1 billion in the challenging period a year ago when the COVID-19 health crisis brought the economy to a standstill.

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With higher oil prices benefiting the sector – the average price in the fourth quarter of 2021 was $77.10 a barrel, 81% above the average price of $42.70 in the fourth quarter of 2020 – it will is also expected to record the highest year-on-year sales increase of all 11 companies. sectors by 66.9%, according to FactSet.

At the corporate level, ExxonMobil (NYSE:), Chevron (NYSE:) and ConocoPhillips (NYSE:) are expected to be the largest contributors to the industry's Y-o-Y spike in revenue. Together, the three oil companies account for $16.5 billion of the projected $28.3 billion year-over-year revenue improvement for the sector.

According to the InvestingPro Energy Stock Screener, Diamondback Energy (NASDAQ:), Continental Resources (NYSE:), Pioneer Natural Resources (NYSE:), Coterra are a few other notable names that will see significant improvements in their fourth quarter financial results. to enjoy. Energy (NYSE:), and Devon Energy (NYSE:), all of which are expected to achieve more than 100% growth in both EPS and revenue.

InvestingPro Energy Stock Screener

Source: InvestingPro

The Energy Select Sector SPDR® Fund (NYSE:) – which tracks a market cap-weighted index of US energy companies in the S&P 500 – is up 50.3% in the past 12 months, compared to 24% of the S&P 500 profit over the same time frame.

In addition to Exxon, Chevron and ConocoPhillips, some of the largest holdings of XLE include EOG Resources (NYSE:), Pioneer Natural Resources (NYSE:), Schlumberger (NYSE:), Marathon Petroleum (NYSE:), Williams Companies (NYSE: ), Phillips 66 (NYSE:), and Kinder Morgan (NYSE:).

2. Industry: aerospace and defense, airlines lead year-over-year growth
Expected fourth quarter revenue growth: +12.3% year-over-year

The industrial sector was one of the hardest hit by COVID-related shutdowns at this time last year. However, this quarter is expected to report the second highest annualized earnings growth of all 11 industries, with an impressive 108% increase in EPS in the fourth quarter, according to FactSet.

In fact, 11 out of 12 industries in the sector are predicted to report a jump in YoY profit, led by the Aerospace & Defense and Airlines groups, for which collective EPS is expected to grow 380% and 78%. rise, respectively from a year ago.

The industry, which is arguably the most sensitive to economic conditions, is also expected to report the fourth-largest year-over-year revenue growth, with fourth-quarter revenue rising 12.3%.

At a company level, Southwest Airlines (NYSE:) and Delta Air Lines (NYSE:) are two stocks to watch. Southwest is expected to report fourth quarter EPS of $0.04, significantly better than a, while Delta is expected to report revenue of $8.85 billion, an increase of approximately 123% from revenue of $ 3.97 billion.

According to the InvestingPro Industrials Stock Screener, United Parcel Service (NYSE:), Raytheon (NYSE:) Technologies (NYSE:), Caterpillar (NYSE:) and Boeing (NYSE:) are some of the other notable companies expected to to report solid Q4 results.

InvestingPro Industrials Stock Screener

Source: InvestingPro

The Industrial Select Sector SPDR® Fund (NYSE:), which tracks a market capitalization-weighted index of industrial sector stocks from the S&P 500, is up 18.2% in the past 12 months.

XLI's top ten holdings include Union Pacific (NYSE:), UPS, Honeywell International (NASDAQ:), Raytheon, Boeing, Caterpillar, General Electric (NYSE:), 3M (NYSE:), Deere (NYSE :), and Lockheed Martin (NYSE:).

3. Materials: Metals & Mining Rally to Turn Profit, Revenue Growth
Expected fourth quarter revenue growth: +24.6% yoy

The materials industry is expected to push the third-largest year-on-year earnings growth of all 11 sectors, with fourth-quarter earnings per share expected to rise nearly 61% from the turbulent period a year ago, according to FactSet.

With stronger metal prices, including , , , , , and , benefiting the industry, it is also expected to report the second largest YoY gain in revenue, with sales forecasting close to 25%.

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Not surprisingly, all four industries in the sector are expected to report robust growth in the fourth quarter, with the Metals & Mining group seeing an increase in profits and sales of 132% and 56% respectively compared to the same period last year.

At the corporate level, Nucor (NYSE:) is expected to be the largest contributor to Y-o-Y earnings growth for the industry, with earnings per share and sales of 956% and 81.7%, respectively.

Additionally, Freeport-McMoRan (NYSE:), (NYSE:) and LyondellBasell Industries (NYSE:) are other notable companies of the group that stand out for their potential to deliver impressive Q4 results, according to the InvestingPro Materials Stock Screener.

InvestingPro Materials Stock Screener

Source: InvestingPro

The Materials Select Sector SPDR® Fund (NYSE:) tracks a market capitalization-weighted index of US basic materials companies in the S&P 500 and is up 16.8% over the past 12 months.

XLB's ten largest shareholdings include Linde (NYSE:), Sherwin-Williams (NYSE:), Air Products & Chemicals (NYSE:), Ecolab (NYSE:), Freeport-McMoRan, Newmont Mining (NYSE: ), Dow , DuPont de Nemours (NYSE:), PPG Industries (NYSE:), and International Flavors & Fragrances (NYSE:).

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