JPMorgan Anticipates Growth in Q3 Corporate Earnings to Bolster Equity Markets

JPMorgan forecasts that corporate earnings in the third quarter will support equity markets, with profit growth extending beyond the technology sector, which has dominated recent earnings gains in the U.S. Led by strategist Mislav Matejka, the bank noted that while headline earnings projections are high, underlying estimates suggest more modest growth expectations across the broader market. Following September's market volatility, corporate results are expected to become a focal point for investors.

Consensus forecasts compiled by IBES indicate that earnings per share for the S&P 500 are projected to increase by 24% in the third quarter. Estimates from FactSet and LSEG suggest growth could be as high as 30%, although this includes adjustments for a one-time tax charge from Meta (NASDAQ:META). Excluding Nvidia (NASDAQ:NVDA) and Micron Technology (NASDAQ:MU) lowers the projected increase to 15%. The median S&P 500 constituent is expected to see an 8% growth in earnings, highlighting the variance between overall index performance and individual company expectations.

In Europe, companies are anticipated to deliver earnings growth of 19%, with a reduction to 11% when excluding the energy sector. The median earnings growth forecast stands at 9%, with median revenue growth for both the S&P 500 and Stoxx 600 indices estimated at 7%. This outlook is part of JPMorgan’s assessment that earnings growth is becoming more widespread.

Supporting its earnings outlook, JPMorgan pointed to global purchasing managers' indices, which have recently reached multi-year highs. The bank’s earnings lead indicator has also shown consistent growth, historically preceding changes in corporate earnings by about two quarters. As a result, JPMorgan anticipates that earnings conditions will remain favorable for at least the next two reporting seasons. The firm also noted that a historically high proportion of global companies are reporting accelerating earnings growth, with artificial intelligence-related businesses continuing to be significant contributors while other sectors are increasingly adding to gains.

In terms of the European market, JPMorgan predicts that companies will see further operating margin expansion, with earnings before interest and taxes expected to represent 14.4% of sales this year.