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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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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