Image Source: Factset Insight
One of my favorite sources of earings intel is from the good folks at Factset. The chart above from Senior Equity Analyst John Butters shows how companies in the S&P 500 are doing when reporting their 3Q2017 earnings.
So far, so good to me!
What's interesting is how a majority of companies and sectors are beating their earnings and sales estimates. That is a big deal - let me explain.
When companies grow their sales, that means they are seeing demand for their products or services from customers both here and abroad.
Customer demand for goods and services from S&P 500 companies should continue to stay steady well into the end of the year with low-interest rates and corporate tax reform on the horizon.
The sectors from the chart which stands out for me are Materials & Energy. Companies in the materials sector include Air Products & Chemicals, Martin Marieta Materials, Steel dynamics and Ball Corp. Firms from the energy sector include Valero Energy, Helmerich & Payne, Inc, and ConocoPhillips.
Ther reason I like these sectors is that they've been beaten down the last year or so and are now starting to make a comeback with improving fundamentals.
Given the recent environmental tragedies the country has suffered earlier this year, both groups look poised for future earnings growth as businesses rebuild using construction materials and energy refiners come back online as winter approaches for some states in the Midwest & Northeast.
These two sectors are also cheap based on their forward price to earnings ratios and have the added benefit of both a sales and earnings upswing.
The only downside I can see is if end demand from consumers and businesses do not materialize as hoped or expected by market participants.
For now, though, keep a close eye on these two sectors as the economy continues to move forward. For more information on Mr. Butters' note, click here.
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