Last quarter, S&P 500 Index companies kept a record 17 cents of profit from every dollar of sales.
FactSet has tracked this number since 2009, and it has never been higher.
Look at how fast it happened.
For three years, the bars bounced between 11% and 13%.
Then 2026 hit.
The margin jumped to 14.7% in the first quarter and 17.0% in the second.
Now, there’s a catch.
Alphabet (GOOGL) and Amazon (AMZN) did some heavy lifting. Both booked big paper gains on investments they hold. Take those two out, and the second-quarter margin drops to 15.1%.
That’s still a record. Just a more honest one.
Now look at the last bar. With third-quarter reports still rolling in, the margin sits at 14.9%. That’s down from 17.0%. But it’s still the second-best quarter on FactSet’s books. It’s well above the 13.0% from a year ago. And it’s well above the five-year average of 12.6%.
So the profit machine isn’t breaking. It’s coming off a sugar high. Analysts expect 15.2% in the fourth quarter and higher from there.
But the index number hides the real story. You find it one level down.
Look at energy. Its margin jumped to 15.4% from 8.1% a year ago. That’s the biggest move on the chart. The war in Iran choked off fuel supply around the world. Anyone who turns crude oil into gasoline and diesel is cashing in.
Now look at the far right. Health care’s margin slipped to 7.5% from 7.9%. Only consumer staples keep less.
One sector printing money. One sector squeezed.
That’s the split I want you to watch next week. Because Adam’s Green Zone Power Ratings system flagged one stock from each end of that chart.
“Bullish” Earnings to Watch
These stocks are expected to beat their earnings per share (EPS) from the previous quarter. And if those expectations are met or exceeded, they could potentially trade higher.
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 eight companies that made this week’s list:
Marathon Petroleum Corp. (MPC) reports Tuesday, November 3, before the open. The estimate is $25.37 a share, up from $17.73 last quarter.
That’s a 43% jump in one quarter. A year ago, Marathon earned $3.01 in this same quarter.
That’s a high bar. Here’s why I think Marathon can clear it.
Start with last quarter.
Wall Street expected about $14.50. Marathon earned $17.73. Its refining margin hit $36.33 per barrel, more than double the $17.58 per barrel from a year earlier. And it captured 112% of the benchmark margin.
In plain English, it squeezed more profit out of each barrel than the market price alone would suggest.
Then look at its biggest rival.
Valero (VLO) reported last week. It earned $23.90 a share and topped estimates. Its per-barrel margin hit $39.24. A year ago, it was $13.14. The industry’s benchmark margin rose more than 150% from a year ago in the third quarter.
And Marathon has done this before.
It beat estimates in seven of its last eight quarters.
Now the caveat.
Back in August, management warned that third-quarter maintenance would cost about $290 million. Some of its Gulf Coast and Mid-Continent units went offline for repairs.
Management said that would hurt how much margin it captures. It also guided to 2.8 million barrels a day, down from 2.9 million last quarter.
So here’s my read.
The market handed Marathon a great quarter. Valero proved that. The only question is how much the repair work eats into it.
“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 (QOQ) decline in earnings.
Here are 10 companies that passed this screen:
Humana Inc. (HUM) reports Friday, November 6, before the open. The estimate is a loss of $1.00 a share. Last quarter, it earned $5.73.
Here’s the math nobody talks about.
Humana earned $17.91 a share on an adjusted basis in the first half of the year. Its full-year guidance calls for “at least $9.00.” So, Humana expects to return almost $9 per share in the second half.
That’s not a surprise to management. It’s how Medicare Advantage works.
Seniors meet their deductibles early in the year. Then they use more care, and Humana pays more of the bill. Its benefit ratio was 91.2% last quarter. The full-year guide is 92.75%.
That tells you costs run hotter from here.
So why has the stock been so strong?
On October 9, the government released its new star ratings. Humana knocked it out of the park. For 2027, 95% of its Medicare Advantage members are in plans rated four stars or higher. For 2026, it was 20%. The stock jumped 15% in one day.
But here’s the problem.
Those ratings set bonus payments for 2028. Not one dollar of that shows up in next week’s report.
So the stock is priced for good news two years out. And next Friday, the company has to report a loss.
To be fair, Humana knows how to clear a low bar.
Last quarter, it earned $7.61 on an adjusted basis against an estimate of $7.23. And it reaffirmed its $9.00 outlook twice this month. Companies don’t usually do that three weeks before a disaster.
But watch the headline.
Humana warned that its GAAP results will fluctuate due to changes related to a joint venture. The GAAP number and the adjusted number could look very different. Know which one you’re reading.
What To Do Next Week
Here’s your plan.
If you’re watching Marathon, Tuesday morning is your moment. Check one number first: margin capture. If it lands near 100% or better, the maintenance work didn’t hurt much, and $25.37 looks reachable. That’s the setup the system wants.
If you own Humana, don’t add ahead of Friday. Read past the loss. Listen for two things: medical costs and 2027 enrollment. Humana told about 600,000 members their current plans won’t be offered next year. If costs run hot or members walk, a stock priced for 2028 could have a rough 2026 finish.
And keep both tables handy. The rest of the names report all week long.
Record margins don’t lift every boat. Next week, you’ll see which ones float.
Until next time…
Safe trading,
Matt Clark, CMSA®
Chief Research Analyst, What My System Says Today
