The global economy is cooling off, so what's an investor to do? Find S&P 500 companies still growing like crazy. They're out there.
Fifteen S&P 500 companies, including consumer discretionary firms Norwegian Cruise Line and Carnival plus health care company Moderna, are expected to boost their revenue by 100% or much more in their upcoming earnings reports, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. First-quarter earnings reports kick off in earnest this week with the S&P 500 financials.
Such growth is getting harder to find. Inflation, rising interest rates and war are all putting the brakes on the economy. It's just unclear by how much.
For these reasons, LPL Research reduced U.S. and global GDP growth forecasts by about a percentage point. "Still, we expect the U.S. economy to grow 2.7% to 3.2% in 2022, supported by business investment and consumer services spending in the latter half of this year," said Jeffrey Roach, chief economist at LPL Financial.
So you'll have to look harder to find growth in the S&P 500.
S&P 500 Growth: What To Expect In The First Quarter
The economy may slow. But the first-quarter will highlight companies still sporting growth.
Companies in the S&P 500 are expected to post 10.7% higher revenue in the first quarter, says John Butters of FactSet. That's actually pretty solid.
"If 10.7% is the actual growth rate for the quarter, it will mark the fifth-straight quarter of year-over-year revenue growth above 10% for the index," Butters said. "Ten of the eleven sectors are projected to report year-over-year growth in revenues, led by the energy, materials, and real estate sectors."
Some of the S&P 500 sector's growth is on fire. Just in energy, companies in the sector are expected to boost revenue by nearly 45%. And in materials, revenue in the quarter is expected to jump more than 20%.
But even these top sectors' growth is nothing to what analysts see coming from a few top S&P 500 companies.
Cruise Lines: Cruising At High Speed
If there's a theme to watch for in the first quarter, it's the comeback of growth to many companies clobbered by the pandemic.
All three of the S&P 500 companies analysts think will post the highest revenue growth in the first quarter are cruise lines. And the numbers are huge. Take Norwegian Cruise Line. The company that runs nearly 30 ships with more than 59,000 berths is expected to post first-quarter revenue of $760.3 million. That's up a staggering 24,426% from the mere $3.1 million in revenue it look in during the same year-ago period.
It's important to note, though, the company is still facing turbulence: analysts think it will lose $1.40 a share in the March quarter. But that's sure better than the $2.03 a share Norwegian lost in the first quarter of 2021. Shares are down nearly 2% this year.
Look for similar situations at other S&P 500 cruise lines. Carnival, the industry giant with nearly 90 ships and 223,000 berths, is expected to boost revenue by more than 5,594% in its upcoming quarterly report. That would push revenue up to $2.8 billion for the quarter ended in May (it already reported results for the fiscal quarter ended in February). It, too, though is expected to lose money in the May quarter. It's also important to note, Carnival is a bit of a cautionary tale. The company's revenue for the February quarter missed forecasts by more than 28%. That explains why the stock is off 7.4% this year.
Trying To Grab Growth Is Tough
Investors chasing after growth, though, need to know risks abound. Vaccine leader Moderna is a reminder.
Analysts think the company's revenue will jump more than 150% in the first quarter. That's stellar, especially on top of more than 110% expected profit growth for the quarter. But it's been a race of many false starts. Shares of Moderna are down more than 37% this year. Yes, revenue is on pace to jump this year by nearly 20%. But profit this year is seen actually falling nearly 3%.
And that's why S&P 500 investors are looking for less speculative, but still fast growing companies to ride. Shares of trucker CF Industries are up more than 50.9% this year — topping all the fast-growing companies in the first quarter. Meanwhile, the company is on the verge of reporting 145% higher revenue in the first quarter.
That's the kind of growth you just don't find much in the S&P 500 now. But it's there if you look.
Fastest Growing S&P 500 Companies
Based on forecasts for revenue growth in upcoming report
| Company | Symbol | Stock YTD % ch. | Revenue % ch. expected in upcoming quarterly report | Sector |
|---|---|---|---|---|
| Norwegian Cruise Line | -2.3% | 24,426.9% | Consumer Discretionary | |
| Carnival | -7.9 | 5,594.1 | Consumer Discretionary | |
| Royal Caribbean Cruises | 2.4 | 2,617.3 | Consumer Discretionary | |
| Live Nation Entertainment | -9.9 | 565.3 | Communication Services | |
| Coterra Energy | 49.9 | 263.5 | Energy | |
| Moderna | -37.0 | 151.4 | Health Care | |
| CF Industries | 51.2 | 144.4 | Materials | |
| United Airlines | -3.1 | 136.3 | Industrials | |
| Host Hotels & Resorts | 2.6 | 135.1 | Real Estate | |
| Pioneer Natural Resources | 35.5 | 127.5 | Energy | |
| Southwest Airlines | -0.5 | 127.0 | Industrials | |
| Booking Holdings | -9.6 | 122.9 | Consumer Discretionary | |
| American Airlines Group | -5.5 | 119.4 | Industrials | |
| Delta Air Lines | -2.2 | 115.8 | Industrials | |
| Alaska Air Group | 1.4 | 107.8 | Industrials |
