Analysts expect a big earnings drop this season. These 14 stocks are set to buck the trend

Published Fri, Apr 7 20236:00 AM EDTUpdated Fri, Apr 7 20237:27 AM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Wall Street expects a weak first-quarter earnings season, which kicks off next week with results from JPMorgan Chase (JPM) and other major U.S. banks. But more than a dozen Club holdings, including Amazon (AMZN) and Caterpillar (CAT), are projected to buck the trend and grow profits. First-quarter earnings per share for the S & P 500 are set to decline by 7% compared with the year-ago period, Goldman Sachs said in a note to clients Wednesday. That would be a "significant deterioration" from the 1% decline in the broad index's fourth-quarter EPS , the firm said, and the largest year-over-year drop since the third quarter of 2020. Goldman sees margin compression as the main driver of the decline. The earnings picture will, of course, vary underneath the hood. That's why we spend less time worrying what the S & P 500 will earn and focus more on how individual companies are performing . Some S & P 500 sectors, like consumer discretionary and energy, are poised to grow profits compared with 2022, according to Goldman. Materials and health care, meanwhile, are expected to see the biggest EPS contraction. The health-care part is interesting, because the industry is usually seen as stable earnings growers. But keep in mind many companies are lapping Covid-driven sales from last year. Within the Club's portfolio, we found 14 companies that are set to report positive earnings growth this earnings season, according to FactSet estimates. We ranked them by projected percentage increase. Our list does not include Wynn Resorts (WYNN), because the casino operator is projected to remain unprofitable in the quarter. However, analysts expect its loss-per-share to shrink to 17 cents from $1.21 year ago as its Macau business recovers from China's strict Covid controls. It's still important to highlight Wynn, though, since improvement to the bottom line is encouraging. In fact, Wynn's second-quarter ending in June is expected to be Wynn's first period with positive EPS since September 2019, following more than three years of Covid disruptions to operations. What it means Earnings growth is what investors want to see over the short and long run. And considering the near-term prospects for the S & P 500, we're pleased a solid chunk of our portfolio companies is expected to post earnings growth this coming season. At the same time, Wall Street is increasingly worried the economy is just beginning to show cracks and a material slowdown could be on the horizon. This means investors will pay especially close attention to companies' forward guidance and commentary. How are management teams thinking about the economy and its impact on their respective businesses? Have they noticed any changes to customer behavior that began to bubble up after the reporting period concluded? Consider Wells Fargo (WFC), which reports next Friday, April 14. It is understood that its first-quarter 2023 earnings will benefit from favorable year-ago comparisons because interest rates were basically zero for most of the first quarter of 2022. For banks, in particular, what investors really want to know is what firms see going forward, after the U.S. banking sector — and economy overall — was upended by the collapse of three lending institutions in March. In a note to clients Wednesday, bank analysts at Morgan Stanley drove this point home in the very first line: "April earnings will be about the outlook, not the results." To be clear, this does not mean that across the whole market quarterly numbers are irrelevant. For example, Halliburton 's (HAL) results will capture how oil-and-gas drilling activity held up this year through March despite a decline in crude prices. Microsoft 's (MSFT) numbers may shed light on the immediate financial impact from the artificial intelligence hype throughout the first quarter. Ford Motor 's (F) print will show how the automaker took steps to move past its very ugly fourth quarter. As always, we'll analyze both our companies' earnings reports and consider their guidance to ensure our investment rationale is still intact. (See here for a full list of the stocks in Jim Cramer's Charitable Trust) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

An Amazon Prime truck is pictured as it crosses the George Washington Bridge on Interstate Route 95 during Amazon's two-day Prime Early Access Sale shopping event for Amazon members in New York, October 11, 2022.

Mike Segar | Reuters