While Nvidia (NVDA) is expected to achieve an impressive 226% profit increase this year, the spotlight is now shifting to two S&P 500 companies, both operating outside the tech sector and artificial intelligence, which are on track to surpass these projections.
American Airlines (AAL) and United Airlines (UAL), both major players in the airline industry, are poised for substantial gains in their adjusted earnings per share, with anticipated growth rates of 367% and 288%, respectively, in the current calendar year. This data comes from an analysis conducted by Investor’s Business Daily, drawing from information provided by S&P Global Market Intelligence and MarketSmith.
Such remarkable earnings growth from unexpected quarters marks a noteworthy conclusion to the year. Rather than relying solely on the “Magnificent Seven” tech stocks like Nvidia, various sectors within the S&P 500 are now making substantial contributions to profit growth.
“Corporate earnings are coming in better than projected, and growth expectations are strong for the next quarter,” notes Brad McMillan, Chief Investment Officer for Commonwealth Financial Network.
Investors are eagerly anticipating the continuation of the stronger-than-expected third quarter for S&P 500 profit. If this trend persists, it may render stock prices even more attractive. The current valuation of the S&P 500 indicates that it is trading at 17.8 times expected earnings for the upcoming 12 months, a figure presented by John Butters of FactSet. This valuation is slightly cheaper than the market’s five-year average of 18.7 times forward earnings.
However, analysts are exercising caution, projecting a modest 0.6% rise in S&P 500 profit for the entirety of 2023. Notably, analysts have revised their earlier expectations for the pivotal fourth quarter, anticipating a growth rate of 3.9%, down from the 8.1% growth forecasted in September.
Nevertheless, several outliers are emerging, particularly in the airline industry. With passengers resuming air travel following pandemic-related restrictions, the profit of some airlines is skyrocketing.
American Airlines is forecasted to achieve adjusted earnings of $2.33 per share in calendar year 2023, reflecting an astounding 367% increase compared to the previous year. While the company is set to release its year-end results on January 24, its shares have faced an 8% decline this year, despite these promising figures.
Similarly, United Airlines has witnessed a 1.7% decline in its shares this year, although it is expected to report earnings of $9.77 per share in 2023, indicating a profit growth of over 287%. CEO Scott Kirby commented on the company’s impressive performance, even in a challenging industry environment, during a call with investors.
However, the impressive profit growth is not limited to these two airlines and Nvidia alone. In fact, a total of eight stocks within the S&P 500 are projected to at least double their adjusted profit in the current year.
This diversification includes utility stocks, which are still considered promising opportunities in the market, according to Morningstar. For instance, NRG Energy (NRG) is expected to boost its adjusted earnings per share by 175% to $4.81 this year.
While investors have various concerns in the current market landscape, the potential for profit growth is certainly a positive aspect, particularly for those who are exploring opportunities in the right sectors.
Top S&P 500 Profit Growth in 2023:
- American Airlines (AAL) – Industrials – 367.0%
- United Airlines (UAL) – Industrials – 287.5%
- Nvidia (NVDA) – Information Technology – 226.3%
- NRG Energy (NRG) – Utilities – 175.1%
- Airbnb (ABNB) – Consumer Discretionary – 163.7%
- Allstate (ALL) – Financials – 161.8%
- Live Nation Entertainment (LYV) – Communication Services – 124.1%
- Everest Group (EG) – Financials – 101.8%
