Earnings set to decline YOY for most S&P 500 sectors

Third-quarter earnings for most sectors in the S&P 500 will likely fall compared to the same period in 2022.

Communication services, consumer discretionary, utilities and industrials sectors are forecast to post declines in the double digits, while information technology and consumer staples stocks will post narrow declines, according to the latest estimates compiled by S&P Global Market Intelligence. Sticky inflation, rising interest rates, market turmoil and a slowing economy are among the factors expected to eat into corporate profits.

Overall third-quarter S&P 500 EPS is forecast to rise by 4.1%, buoyed by double-digit gains in the energy and real estate sectors, along with growth in healthcare and materials.

Predictions at both ends

The largest S&P 500 companies by market capitalization are broadly expected to grow earnings year over year.

Analysts predict Apple Inc., the index's largest constituent, will report a 7.6% gain in quarterly normalized EPS even with an expected 0.9% fall in revenue. The revenue fall would be slightly narrower than the 1% decline reported in the prior quarter. NVIDIA Corp., a darling in the push for broader AI adoption, will likely more than double quarterly revenue compared to the third quarter of 2022.

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On the other end of the index's market cap spectrum, the view is more mixed.

LyondellBasell Industries NV is expected to post a 4.1% year-over-year drop in third-quarter normalized EPS and a larger drop in revenue. Meanwhile, analysts predict Consolidated Edison Inc. will post flat EPS as revenue is set to decline.

Biggest gains, drops

NVIDIA is also one of the S&P 500 companies expected to post the largest year-over-year gains in quarterly EPS. Royal Caribbean Cruises Ltd. is predicted to report the highest gain in EPS, with an estimate of $3.41 per share that is more than 13 times higher than the year-ago figure. The cruise operator is riding positive momentum as travel activity returns following COVID-19 pandemic shutdowns.

Western Digital Corp., meanwhile, is forecast to post a loss of $1.92 per share, with the more than tenfold drop in earnings over the same quarter a year ago as the largest expected decline. The company has navigated declining revenues amid an ongoing drop in demand for its products, including hard drives and flash storage.