S&P 500 companies grew second-quarter earnings per share by close to 50% from a year earlier, a pace the source calls extremely rare outside a recession recovery. Columnist Mark Hulbert argues the surge rests on one-off factors that will fade, and history says growth this fast is more often than not followed by growth well below average.
Second-quarter earnings per share for the S&P 500 came in close to 50% higher than a year earlier, according to MarketWatch columnist Mark Hulbert. That kind of growth rate is extremely rare except when the economy is emerging from a recession, which is not the case now.
The four-quarter earnings-per-share growth rate through June 30 is close to 35%. Since 1928, only 8% of quarters have shown a higher trailing four-quarter growth rate, against a long-run average of 12.7%. Hulbert notes that soaring growth rates tend to be followed by below-average ones, and vice versa, so extrapolating the recent pace into the future runs against history.
Arun Sundaram, senior vice president for investment strategy at CFRA, laid out several one-off factors in an email to clients this week. He pointed to massive unrealized mark-to-market gains on equity stakes in Anthropic, OpenAI and SpaceX, which benefited Google, Amazon, Microsoft and Tesla. Sizable tariff refunds also lifted results at Apple, Walmart and Procter & Gamble, while a surge in energy-sector earnings followed higher oil prices tied to the war with Iran.
Sundaram warned these factors "will create some meaningful [year-over-year] comparability issues as we move into 2027", according to his email cited by MarketWatch. Hulbert's bottom line is that the recent pace of S&P 500 earnings growth is not a base rate to plan around. History suggests EPS growth over the next 12 months will run markedly below what the market has enjoyed in recent quarters.
Source: MarketWatch
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