An earnings season that is shaping up to be especially supportive for S&P 500 companies. According to FactSet, EPS are expected to rise 23.2% in Q2. That also helps explain why indexes are sitting at high levels, despite all the turbulence this year: profit momentum has been impressive.

And it may not be over. Companies have a habit of beating the consensus (it's practically a national sport in the United States), and therefore posting results above expectations. In the end, profit growth at the close of an earnings season is almost always higher than what was initially forecast.

FactSet has calculated that this gap averages 6.2% over the past 5 years. Taking the consensus and adding the average gap would therefore produce 29.4% profit growth by the end of the second quarter. The symbolic 30% mark is hence within reach.

Source: FactSet

The two sectors expected to contribute most to this growth are energy (+123%) and technology (+63%). The former benefited from a high oil price in Q2, against the backdrop of the war in Iran. The second is riding the AI wave. In particular, memory chip makers are seeing their results literally explode. 

Analysts expect FY 2026 EPS growth of 24.2%, which explains valuations that remain at reasonable levels. The S&P 500 is currently trading at 20.5x earnings, slightly above its 5-year average (19.9).

In recent years, earnings seasons have often been positive stretches for markets, precisely because companies keep beating consensus. What is different this time is that expectations are already very high. It will not be enough to post good, or even very good, results to be rewarded - and any disappointment could well be punished.

https://www.marketscreener.com/news/30-earnings-growth-in-the-united-states-ce7f5edcd98eff2c