How Earnings Will Determine the Fate of Many of the Best Performing Sectors

stock_sectorsEarning season in the United States moved into its second week, and it appears that there have been mixed results.

While the financials have knocked the cover off the ball, technology shares are seeing numbers that are uninspiring. Stallworth Johnson and Johnson helped the healthcare space gain traction, as investors attempt to determine which sectors will benefit from financial results.

The question for stock investors is whether the recent run up in prices will be justified by the financial results that the majority of the S&P 500 index reports over the next 4-week period.  

During the last 22-trading days, which is basically a month, all sectors of the S&P 500 index are higher.  The best performer of the group is technology which is up nearly 4.9%.  Technology companies just started to report with mixed results.

So whether you’re trading online shares or buying mutual funds this articles is going to show you the sectors that you may want to watch the closest right now.


The Technology Sector – IBM

The first major technology company to report earnings was IBM. Big blue has been down on its luck over the past few quarters, reporting number that were worse than expected and experiencing a drop in its value following those results.  

This time around it appears that IBM nailed its earnings and revenue and even came up with better than expected guidance.

IBM reported Q2 net profits that declined to $2.5 billion, or $2.61 a share, from $3.45 billion, or $3.50 a share, a year ago. Sales also declined dropping to $20.24 billion. Excluding a one-time charge IBM would have earned $2.95 a share.

Analysts surveyed had forecast earnings of $2.89 a share on revenue of $20.07 billion. Guidance was in line with expectations as the company maintained its earnings outlook at $13.50 for 2016.  

In July the tech giant climbed nearly 6% in value, but it appears that the numbers justified this outcome.


The Healthcare Sector – Johnson and Johnson

Healthcare was the second best performing sector leading into the earnings season.  But now it appears that this move could have also been justified.  Johnson and Johnson reported financial results before the opening bell on Tuesday and also appeared to beat on the top and bottom line.

Jonson & Johnson reported Q2 net profits $1.74 per share compared to analysts’ expectations of $1.67 per share. Revenues reported for the Q2 were also better expectations.

The company posted revenues of $18.5 billion, compared to analyst’s estimate of $17.9 billion. The key to the release was the company’s guidance which was robust.

 The company reported 2016 revenue guidance of $71.5 billion – $72.2 billion from $71.2 billion to $71.9 billion. Net profits were also guided higher.  The company increased its earnings guidance to $6.63 – $6.67 per share from $6.53 – $6.68 per share.


The Staples Sector

Interestingly enough the sector that was the third best performer going into the earnings season was staples.  

This is a very defensive sector similar to utilities.  The overall sector has a relatively high PE given there is usually very little growth in the sector.

The reason seems to be that investors are looking for stability and yield from the dividends many of these companies pay to investors.  

Either way, this earnings season will determine the fate of many of the best performing sectors in the U.S. equity markets.


Final Thoughts…

So what stocks are you watching in these sections?  Share your thoughts and comments below.

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