Earnings estimates have been following an unusual pattern this time around

By Bill Peters

Analysts generally lower their estimates in the months before earnings. But thanks to the energy and tech sectors, expectations have actually climbed heading into second-quarter results.

JPMorgan is on this week's earnings docket.

As second-quarter earnings kick into high gear this week, Wall Street analysts seem to be feeling pretty good, despite ongoing concerns about the impact of the Iran war.

"Heading into the start of the earnings season, analysts and companies have been more optimistic than normal in their earnings outlooks for the second quarter," John Butters, FactSet's senior earnings analyst, said in a report Friday.

Analysts generally lower their earnings forecasts for companies as they get closer to reporting quarterly results. But between March 31 and June 30, estimated earnings for the second quarter actually increased by 3.4%.

Much of that heightened optimism revolves around the energy industry, as oil prices (CL00) (BRN00) have been volatile amid continued fighting in the Middle East. Large technology companies like Micron Technology (MU) and Nvidia (NVDA) have also helped drive earnings estimates higher, according to Butters.

Energy and information-technology account for "most of the increase in earnings expectations" for the second quarter, he wrote.

Meanwhile, Wall Street analysts expect S&P 500 SPX companies overall to grow earnings by 23.6% for the second quarter, according to FactSet. If that holds, it would not only be the second quarter with gains above 20%, but also the seventh consecutive quarter of double-digit earnings growth for the index.

After Delta Air Lines (DAL) on Friday said travel demand remained strong despite stomaching "the highest quarterly fuel expense" in the air carrier's history, results this week from big banks like JPMorgan (JPM) and Bank of America (BAC) will offer a look at the broader economy.

Results are also due from Netflix (NFLX), as analysts try to gauge the impact of the streaming giant's price increases earlier this year. Benchmark Research analyst Daniel Kurnos, in a note on Thursday, said "third-party data signals suggested that engagement was already starting to see some cracks after the recent round of price hikes."

The Wall Street Journal reported on Thursday that Netflix was considering launching live channels or introducing bundles with other subscription offerings, and investors will be looking to see if management hints at plans like that on the earnings call.

-Bill Peters

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07-12-26 1000ET