The second-quarter earnings season has been a roller coaster for the S&P 500, with nearly half the sectors reporting earnings growth. The growth was mostly led by the Medical, Business Services and Financial sectors.
The medical sector got a boost in earnings from the discovery of new drugs and approval of patents and surgical equipment, while new job additions and upbeat consumer confidence boosted the business services sector. Retail banking boosted by strong borrowing helped the finance sector to grow.
Outperformers in Q2 2019
The second-quarter has seen growth in three major sectors Medical, Business Services and Finance. The earnings growth in the medical sector has been 7.4% and revenues rose by 6.3% in the second quarter, whereas business services earnings rose by 9.6% and revenues grew by 4.2%. Earnings of the finance sector rose by 4.4% and revenues jumped 8.2%. (Read More: Q2 Earnings Season Scorecard)
What’s Driving These Sectors?
Healthcare, part of the Zacks Medical sector has reported an earnings growth rate of 8.9%. Healthcare Providers and Services has been the best industry in this sector with a 23% growth rate. The medical sector has seen growth due to discovery in new drugs and surgery methods, new patents in line and advances in biotechnology.
The future seems even brighter with an increase in outpatient clinics as they are cost-effective and favored for treatment and diagnostics. Moreover, the implementation of Artificial Intelligence (AI) in genetics has opened doors to better treatment and earlier diagnosis of cancer.
The existing U.S.-China trade war has negatively impacted business investment but the business services sector has performed well banking on healthy labor market and strong consumer confidence. As per U.S. Bureau of Labor Services’ reading, professional and business services added 160,000 jobs in the second quarter, which shows that the business services sector has expanded.
Additionally, banks and insurance firms that dominate the financial sector have reported nearly 9% growth rates. A major boost came from retail banking that was fueled by strong borrowing. Revenues and profits from credit cards were high as consumers used credit cards more than debit to purchase and the low-interest rates also boosted buying.
Grab These 5 stocks Now
Driven by strong consumer spending in the second quarter the three sectors, Business Services, Medical and Finance have performed well. We can anticipate that the consumer spending will be steady in the third-quarter irrespective of the trade tussle.
We have narrowed down our search to Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Luna Innovations Incorporated (LUNA - Free Report) is a publicly traded company that develops and manufactures new-generation products for the healthcare, telecommunications, energy and defense markets. Luna’s expected earnings growth rate for the current year is 375%. The Zacks Consensus Estimate for the current-year earnings has improved 26.7% over the past 60 days.
Dr. Reddy's Laboratories Limited (RDY - Free Report) is a publicly traded pharmaceutical company. They produce finished dosage, active pharmaceutical ingredients and biotechnology products and market them globally. Dr. Reddy’s expected earnings growth rate for the current year is 25.6%. The Zacks Consensus Estimate for the current-year earnings has improved 21.9% over the past 60 days.
DaVita Inc. (DVA - Free Report) is a publicly traded company providing kidney care and manages and operates medical groups and affiliated physician networksin California, Nevada, New Mexico, Florida, Colorado and Washington. The company’s expected earnings growth rate for the current year is 33.1%. The Zacks Consensus Estimate for current-year earnings has improved 12.3% over the past 60 days.
Clean Harbors, Inc.(CLH - Free Report) is a publicly traded company that offers environmental, energy and industrial services. The company offers end-to-end hazardous waste management, emergency spill response, industrial cleaning and maintenance, and recycling services. The company’s expected earnings growth rate for the current year is nearly 53.9%. The Zacks Consensus Estimate for current-year earnings has improved 6.6% over the past 60 days.
Meridian Bank (MRBK - Free Report) is a publicly traded bank. It offers deposit accounts, credit products, real estate financing, residential mortgages, investment and wealth management and electronic payments processing services. Meridian Bank’s expected earnings growth rate for the current year is 9.9%. The Zacks Consensus Estimate for current-year earnings has improved 3.6% over the past 60 days.
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