We are hitting the stride of the quarterly earnings season next week with energy and utilities on deck.
Before I discuss “bullish” and “bearish” earnings projections, I want to talk briefly about profit margins.
Companies have been concerned about inflationary costs and tariffs cutting into their bottom line.
Net profit margin shows how much revenue a company has left after accounting for all expenses. It’s like the amount in your bank account after you’ve paid all the bills.
So far, the concerns about higher costs and tariffs seem unwarranted, as S&P 500 companies are reporting strong net profit margins for the second quarter.
Net Profit Margins Above 12.8%
The blended average for the S&P 500 is 12.3%. That’s below the previous quarter’s 12.7% average, but above the margin from the same period a year ago.
If things hold this quarter, it will mark the fifth straight quarter the benchmark index reports a net profit margin above 12%.
Five sectors of the market are reporting margins above their five-year average, and five are reporting quarter-over-quarter increases.
More importantly, expectations show that profit margins will continue to grow through the end of 2025.
Now, let’s review one company I highlighted in last week’s edition…
BKNG Hits 5X EPS Mark
Last week, I mentioned keeping an eye on Booking Holdings Inc. (BKNG) because analysts projected a 5X increase in its earnings per share (EPS).
I believed the projection of $50.16 per share, up from $10.06, was lofty considering mixed trends in the travel and tourism industry.
Well, I’m big enough to admit when I’m wrong … and I was … kind of.
Not only did Booking beat analysts’ expectations, but it blew them away. I expected an earnings and revenue beat, but not one this significant!
Booking reported earnings of $55.40 per share on $6.8 billion in revenue.
Its jump in EPS was 32.2% year over year, while its revenue increase was 16% over the same quarter a year ago.
The reason for the increase … a 14.5% jump in gross bookings.
BKNG Up 34.6% From April Low
BKNG showed some choppiness to start the year before the drop in April. Since then, the stock has recovered almost 35% from that low.
All in all, it’s not been a bad year for Booking Holdings. We’ll have to wait and see if they can follow up with another strong quarter amid the busy summer travel season.
(If you want to look up how BKNG stacks up in our Green Zone Power Rating system, click here to find out how you can join Green Zone Fortunes and unlock full access to thousands of stock ratings.)
Now, let’s dive into potentially “bullish” earnings for next week…
Stocks on this list are expected to beat their previous quarter’s EPS, thus could potentially trade higher if those expectations are met… or exceeded.
“Bullish” Earnings to Watch
For this screen, stocks must meet four criteria:
- 10 or more analysts cover the stock.
- The average analyst recommendation is a “Buy.”
- It BEAT analysts’ EPS estimates for the previous quarter.
- The average analyst estimate for the current quarter’s EPS is greater than the previous one.
Here are the top 10 companies that made the list:
Negative EPS is not necessarily a good sign for a company.
This means that the company is spending more than its revenue and is actually losing money.
Let’s focus on Take-Two Interactive Software Inc.’s (TTWO) EPS of -$21.08 in the last quarter.
Take-Two, the holding company that owns popular video games like the Grand Theft Auto and Red Dead Redemption franchises, was hit with a $3.55 billion “goodwill” charge and an acquisition of $176.3 million.
Those are typically one-time hits to the bottom line, so suggesting the company will turn its EPS positive is certainly not out of the realm of possibility.
What I’m watching for is how a drastic turnaround in EPS will impact the company’s “Bearish” ratings on Adam’s Green Zone Power Rating system.
Expedia Group is also looking to reverse its negative EPS trend, and Booking Holdings proved that quarterly EPS growth by a travel and tourism company is definitely possible.
Finally, let’s examine potentially “bearish” earnings for next week…
“Bearish” Earnings to Watch
For our “bearish” earnings screen, we’re only looking for two things:
- 10 or more analysts must cover the stock.
- The average analyst estimate for the current quarter’s EPS is less than the previous quarter’s.
We want companies that are covered by a sufficiently large group of Wall Street analysts who collectively expect the company to report a quarter-over-quarter decline in earnings.
Here are the top 10 companies that passed this screen:
The energy and utilities sectors take center stage next week, with Atmos Energy Corp. (ATO), Duke Energy Corp. (DUK), Sempra (SRE) and Occidental Petroleum Corp. (OXY) all passing our bearish screen.
Thus far, according to FactSet, energy is reporting the largest year-over-year earnings decline of any S&P 500 sector at -24%.
Lower year-over-year oil prices are contributing to the decline in earnings. The average price of a barrel of oil dropped 21% from $80.66 in the second quarter of 2024 to $63.68 in the second quarter of 2025.
Of the five sub-industries within the energy sector, only oil and gas storage and transportation are reporting year-over-year growth in earnings. The remaining four are all declining.
Few utilities have reported thus far, but earnings have declined an average of 1.9% for the ones that have.
Not all is bad news, however.
Both energy and utilities are expected to rebound into positive earnings territory from the third quarter of 2025 through the second quarter of 2026.
All told, it should be an interesting week on the earnings front.
As always, I hope you all have a great weekend!
Safe trading,
Matt Clark, CMSA®
Chief Research Analyst, Money & Markets