US investors brace for corporate earnings season — charts

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It is that time again. JPMorgan Chase will unofficially kick off earnings season on Thursday, in what could be a critical juncture for US stocks that are trading at valuations that many investors consider to be stretched compared with historic norms.

Here are a few charts that sum-up Wall Street’s expectations.

Analysts expect profits for companies listed on the benchmark S&P 500 index to have jumped 9.4 per cent from a year earlier in the first quarter, according to data from FactSet. That would mark the swiftest earnings growth since 2011.

The forecast pick-up in earnings growth from 5.6 per cent in the fourth quarter of last year is important since US equities have rallied sharply since November, making them substantially more expensive when compared with profits. For instance, the S&P 500 was priced at the close on Friday at 17.52-times estimated earnings over the next 12 months, up from 16.53-times a year ago, and near the highest level since 2004.

A trio of sectors is forecast to drive the vast bulk of the S&P 500′s earnings growth: energy, technology and financials.

Energy posted a loss in the first three months of 2016, and is expected to have swung to a profit in the first quarter of this year. That comes as the price of oil has bounced back considerably, to the $50 a barrel range, thanks to an agreement by members of Opec and other major exporters to curb production and a brighter global economic outlook.

Investors should brace themselves for a jam-packed few weeks. Companies accounting for almost 90 per cent of S&P 500 market value will report by May 5, according to Goldman Sachs.

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