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Investing.com - Earnings growth in S&P 500 companies is tipped to have slowed in the second quarter, with estimates having been revised down for nearly every sector, according to analysts at Bernstein.
Writing in a note to clients, the strategists led by Ann Larson predicted that S&P 500 earnings for the quarter will be up by 4.4% versus a year ago, well below a 13% income per share uptick in the first quarter of 2025.
Forecasts for earnings growth declined going into the latest earnings season, the analysts noted, adding that aggregate projections have slipped by 4% since the end of the first quarter.
The downward trend is "broad-based," they said, flagging that estimates for all sectors have been revised lower, apart from real estate, which is "essentially flat."
They also noted that, throughout the first half, annual earnings growth estimates were slashed in every sector except communications, resulting in 2025 S&P index forecasts of 8.5% -- down from 12.7% six months ago.
With a parade of U.S. companies due to open their books in the coming weeks, investors are keen to see how -- if at all -- President Donald Trump’s aggressive tariff agenda is impacting their operations. Economists have warned that Trump’s levies could drive up inflationary pressures and weigh on growth, while uncertainty around the duties has recently hit consumer confidence readings.
Even though profits are likely to be under some pressure, a sharp slide in dollar has been seen as a possible mitigating factor, media reports have suggested.
So far, the new quarterly earnings season has seen a broadly positive start. The major banks which typically kick off the reporting period have mostly topped expectations, although their executives have presented a cautious outlook for the coming months.
Against this backdrop, the most "crowded" trades are in media and entertainment stocks, suggesting that investors have priced these names for "perfection," the Bernstein analysts said. They added that this may mean that these stocks will not react as much to incremental positive results, while negative news could have a "much more pronounced effect."
The least crowded segments -- which would imply a reduced effect from negative news and more upside from positive returns -- are automobiles and car parts as well as household and personal products.
Meanwhile, the most crowded S&P 500 companies with high earnings expectations reporting over the next two weeks include Netflix (NASDAQ:NFLX), Philip Morris International (NYSE:PM), ServiceNow (NYSE:NOW), Charles Schwab (NYSE:SCHW), and Boston Scientific (NYSE:BSX).