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A tough earnings season could be ahead

Several S&P 500 companies are set to report quarterly earnings next week, and analysts collectively expect third-quarter earnings to be the worst of the year when it comes to profit growth, according to S&P Global.

Earnings per share growth is expected to come in at "a meager 3.8 percent, drastically smaller than all the other quarters with [their growth in] double digits," said Erin Gibbs, S&P Global portfolio manager.

"Companies typically beat expectations, so the actual profit growth could be 3 to 5% higher than expectations just before reporting starts," Gibbs wrote Friday in an email to CNBC.

The past two quarters saw particularly good rates of companies beating earnings estimates, with an average of a 73 percent rate of beating expectations for S&P 500 components.

Several financial sector components such as JPMorgan, Citigroup and Bank of America are set to report next week. The sector overall is expected to see an earnings contraction of nearly 6 percent for the third quarter.

"Big positive surprises from financial companies next week could have a significant impact on the overall expectations for the quarter," Gibbs wrote.

Much of the first wave of earnings comes from the financial sector, and the results could prove dismal, said Michael Block, chief strategist at Rhino Trading Partners.

"The banks are suddenly being viewed as growth stocks and we'll see if this really works or if reality bites. I'm in the latter camp but pain and data could swing me at any time. That's how this works," Block wrote in a note Friday.

Wells Fargo and BlackRock are also set to report next week; JPMorgan is the only Dow component set to report.

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