As the second quarter earnings season begins to wind down, Wall Street and Main Street alike are tallying up the scores, and the numbers have been unquestionably strong.
With just under 90% of companies in the S&P 500 (^GSPC) having released second quarter earnings, roughly 80% have reported year-on-year EPS growth, putting the quarter in the 94th percentile for the metric, per Bank of America research
Those results, plus Wall Street consensus forecasts for the third and fourth quarters, put the S&P 500 on track for four consecutive quarters of EPS growth exceeding 20%, per BofA, a phenomenon that has only happened 10 times since 1936. Part of that story, according to Bank of America strategists led by Savita Subramanian, is the AI boom that has largely been driving the US equity market. The second quarter has seen broad earnings growth, with 10 out of 11 sectors on pace for positive year-on-year movement, BofA noted.
Yet, “even so, AI remained the index’s primary growth engine,” the strategists wrote. While the median AI-related stock notched EPS growth of 28%, the median non-AI-related stock saw growth of just 12%. But that strength isn’t likely to last forever, the strategists said.