Here we are, ready for another earnings season! And with the worry about tariffs for the past few months, surprisingly, the forecasts for rising earnings look pretty good.
According to FactSet, so far, 12% of the S&P 500 companies have announced their quarterly earnings, and 83% of them have reported both a positive EPS and revenue surprise. Earnings growth in the reporting companies has averaged 5.6%.
While that is positive, it’s important to note that if that growth percentage trend remains the same, it will be the lowest earnings growth reported by the index since Q4 2023, when S&P 500 companies saw just a 4.0% earnings rise. And that 5.6% growth rate would translate to a forward 12-month P/E ratio of 22.2, above the five-year average of 19.9%.
Out of the 11 S&P 500 sectors, seven have (or are expected to report) higher earnings than previously forecast due to positive EPS surprises and upward revisions to EPS estimates.
Leading the charge are the “Magnificent 7” stocks:
- Apple (AAPL)
- Microsoft (MSFT)
- Alphabet (GOOG and GOOGL)
- Amazon (AMZN)
- Nvidia (NVDA)
- Meta Platforms (META)
- Tesla (TSLA)
These companies are expected to increase their earnings by 14.1%, on average, for the second quarter.
FactSet says the top six contributors to second-quarter year-over-year earnings growth for the S&P 500 are Warner Bros. Discovery (WDB), NVIDIA (NVDA), Vertex Pharmaceuticals (VRTX), Microsoft (MSFT), Broadcom (AVGO), and Alphabet (GOOGL).
Looking ahead, from Q3 2025 through Q1 2026, analysts are forecasting earnings growth rates for the S&P 500 companies of 6.8%, 5.3%, and 10.8%, respectively, which bodes well for the direction of the stock market.
What’s the Big Deal about Earnings Growth?
So, you may ask, why are we always so concerned about earnings growth?
For three good reasons: 1) Earnings are considered the linchpin for evaluating a company’s fundamental strength; 2) Consistent earnings over time are the number one factor in predicting a company’s stock price; 3) Earnings are harbingers of how well the stock market (and economy), in general, is performing.
If the majority of companies in the S&P 500 Index are growing their sales and earnings, traders and investors tend to feel more confident about the future prospects of the stock markets. Alternatively, if most of the companies in the index are seeing earnings below analysts’ expectations, it can be a warning sign of potential trouble ahead for markets and the economy.
Earnings estimates can be formulated in two ways:
1. From the company’s own earnings guidance
2. From Wall Street analysts who usually work fairly closely with a company’s management to forecast earnings
So, when a company has a positive earnings surprise, you’ll often see a rise in its stock price. And vice versa. An earnings “miss” can devastate a company’s stock price, depending on its severity and what the company says caused the miss. For instance, was it a one-time issue? Or is it a reflection of deeper, more systemic problems with the company, such as losing a big customer or a bad FDA trial?
Should Investors Always Go for the Highest Earnings Growers?
The answer to that is simply no. It depends on what an investor is looking for in terms of return and risk. A conservative investor is more likely to choose stable companies with steady growth that often pay dividends and are trading at undervalued levels and offer little risk—value stocks, whose earnings grow at a market average level.
On the other hand, investors who are seeking significant growth (that usually means more risk) in their portfolios may seek out companies that are expected to outpace the market in terms of earnings (and/or revenues) and stock appreciation—businesses that are considered growth companies. For the past 90 years, the average annual return of the S&P 500 Index has been 9.8%. That means that growth companies would be expected to gain more than 9.8%.
It’s important to understand that not all growth companies have rising earnings. In fact, businesses in their infancy will usually have little or no earnings, as they are plowing as much of their cash flow as they can into growing the top line, revenues. It may be several years before they make any money.
But their stock prices often appreciate, based on what the market and investors believe the company’s future earnings will be. These growth companies are driven by momentum and future expectations, and are usually considered speculative investments that should comprise just a small portion of an investor’s overall portfolio.
3 Attractive Stocks with Earnings Growth
For this article, I thought you might be interested in a few companies that are forecast to grow their earnings at a fast clip, yet also have other attributes that make them attractive investments.
I used the following criteria to find the three best candidates:
- Next quarter earnings growth more than 25%
- Price above 20-day and 50-day moving averages
- Very positive institutional transactions
- Positive insider transactions
- Analyst ranking of Strong Buy.
Here are the three companies I ferreted out:
Chime Financial, Inc. (CHYM), a financial technology company, provides digital consumer banking and payment solutions. It offers Chime, a banking application for providing mobile banking services that address the needs of people, such as their spending, saving, accessing liquidity, building credit, savings and perks, community, and support and security.
Laird Superfood, Inc. (LSF) manufactures and markets plant-based, natural and functional food in the United States. The company provides powdered and liquid coffee creamers, and hydration and beverage-enhancing supplements; hydrate coconut water products; performance mushroom supplements; functional, organic roasted, and instant coffee, tea, and hot chocolate products; harvest snacks; and other food items.
Tonix Pharmaceuticals Holding Corp. (TNXP), a biopharmaceutical company, focuses on developing and commercializing therapeutics to treat and prevent human disease. It markets Zembrace SymTouch and Tosymra for the treatment of acute migraine with or without aura in adults. Its portfolio focuses on central nervous system disorders, as well as immunology, infectious disease, and rare disease product candidates.
| Company/Symbol | Price ($) | 12-Month Price Target ($) |
| Chime Financial, Inc. (CHYM) | 32.83 | 38 |
| Laird Superfood, Inc. (LSF) | 6.84 | 12.67 |
| Tonix Pharmaceuticals Holding Corp. (TNXP) | 42.69 | 61.67 |
I hope you find one or more of them to your liking.
By the way, you can find earnings estimates on many websites, including these sites I regularly use:
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