S&P 500 investors are unclear about what the Fed will do this week. But they think one thing for sure: Some companies' businesses are going like gangbusters right now.
Nine companies in the S&P 500 — including Norwegian Cruise Line, Coterra Energy and Enphase Energy — are expected to double their revenue in the soon-to-be-wrapped-up third quarter from the same year-ago period, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. And it's not just impressive revenue growth. Additionally, all the companies' bottom lines should show growth, too.
"While we do not rule out a testing of the June S&P 500 low, we would look at it as a potential buying opportunity and focus on areas that are reflecting the potential downside in economic growth and earnings," said Megan Horneman, chief investment officer at Verdence Capital Advisors.
Finding S&P 500 Companies With Explosive Growth
Pinpointing fast-growing companies in the S&P 500 is getting tougher. But it's still possible.
Just two weeks remain in the pivotal third quarter. And already, analysts think S&P 500 companies' revenue will grow just 8.7% during the period, says John Butters, earnings strategist at FactSet. And that would be a big letdown. If companies' top lines only grow that much, "it will mark the first time the index has reported revenue growth below 10% since (the fourth quarter) of 2020 (when it grew 3.2%)," Butters said.
Facing major headwinds like inflation and higher rates, companies' revenue forecasts are falling. "The estimated (year-over-
year) revenue growth rate for third quarter 2022 is lower now relative to the start of the third quarter," Butters says.
But you can still find some S&P 500 companies putting up big numbers.
Big Growth On The High Seas
If you're looking for companies turning on the jets in the third quarter, look out for the cruise line operators.
All three of the major cruise ship companies in the S&P 500, most notably Norwegian Cruise Line, are expected to post massive jumps in revenue in the third quarter. Not one of them is seen growing less than 550%. That's impressive considering the S&P 500's revenue growth likely won't crack a double-digit percentage.
Just look at Norwegian. Analysts think the company, which operates nearly 30 ships, will post 938% revenue growth in the ongoing quarter. If they're right, that means the company will do $1.6 billion in revenue, up from just $153 million in the Covid-ravaged third quarter of last year.
It's important to note that shares of Norwegian are still down more than 26% this year. All the other cruise ship operators' shares are down this year, too. Why? Nervous investors also want to see sustained profitability, which has been lost at sea for years.
While Norwegian's bottom line will improve more than 200% from the third quarter of last year, analysts say, the company is still seen losing 65 cents a share. Carnival, meanwhile, is expected to lose 15 cents a share in the quarter, and its stock is down 46% this year. Royal Caribbean, though, is seen making 19 cents a share in the quarter, thanks to a 554% jump in revenue. But shares are still down 34% this year.
Energy Stocks Are Hot
Power is going gangbusters in the S&P 500, too. It almost doesn't matter what type.
Coterra Energy, an oil and natural gas explorer, is winning from rising energy costs. Analysts think the S&P 500 company's revenue will rise nearly 400% in the third quarter. And Coterra also gushes profit growth. Analysts think the company's profit will surge 158% in the quarter. Robust revenue plus profit growth? Check. That helps explain why shares are up 52% this year.
But it's not just fossil fuels. Enphase Energy, a high-tech solar gear play, is seen putting up 75% revenue growth in the third quarter. And profit is expected to rise 82% during the period. Investors are willing to pay up for such growth, considering it's so scarce. The company's stock is up nearly 73% this year.
So yes, many S&P 500 companies are slowing down. But that's not stopping some from turning on the jets.
S&P 500 Companies Growing Like Crazy
All these companies are seen posting more than 75% revenue growth in the third quarter
| Company | Ticker | Revenue growth (estimates for Q3 2022) | EPS growth (estimates for Q3 2022) | Sector |
|---|---|---|---|---|
| Norwegian Cruise Line | 937.8% | 207.6% | Consumer Discretionary | |
| Carnival | 799.2 | 163.4 | Consumer Discretionary | |
| Royal Caribbean Cruises | 554.4 | 335.3 | Consumer Discretionary | |
| Coterra Energy | 384.0 | 158.1 | Energy | |
| Albemarle | 166.3 | 563.8 | Materials | |
| VICI Properties | 94.4 | 72.2 | Real Estate | |
| Live Nation Entertainment | 86.2 | 450.9 | Communication Services | |
| Hess | 76.5 | 711.4 | Energy | |
| Enphase Energy | 75.0 | 81.7 | Information Technology |
