With the U.S. second-quarter earnings reporting season kicking off, investors will get a view of consumer health in an economy still stuck with high inflation as the stock market climbs this year.
“Investors have heavily debated the health of the consumer, and results from the consumer discretionary and staples sectors will provide a status update,” Goldman Sachs Group analysts led by chief U.S. equity strategist David Kostin said in a recent research note. “Our consumer staples analysts forecast an end to the food industry’s exceptional growth as inflation-led sales growth moderate,” the Goldman note says. “2023 EPS estimates for consumer staples have been cut by 1% since the start” of the second quarter.
On the homebuilding front, Goldman analysts cited Lennar Corp. LEN as seeing “continued demand strength heading into the summer.”Looking at the S&P 500 broadly, “forward earnings revisions appear to have bottomed,” after bottom-up consensus estimates for earnings per share in 2023 and 2024 “steadily declined” between the start of the year and first-quarter earnings season, according to the note.
During the second-quarter earnings season, Goldman will be monitoring “companies’ ability to push sales to drive profits,” the bank’s analysts said. “Firms can expand margins provided price inflation outpaces input cost inflation.”
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