The S&P 500 Index advanced 4.96 per cent in June. As of June 30, the S&P 500 is up 5.5 per cent year-to-date.
There were nine sectors in the S&P 500 Index that delivered positive price returns in June. The leading sectors were technology, communication services, energy, industrials and financials with gains of 9.7 per cent, 7.2 per cent, 4.7 per cent, 3.5 per cent and 3.1 per cent, respectively.
Just two sectors reported losses in June, real estate and consumer staples, which declined 0.5 per cent and 2.2 per cent, respectively. Market breadth was healthy with 68 per cent of the securities in the index reporting positive price returns.
The top 10 performers in the S&P 500 Index during the month were:
- Coinbase Global Inc. (COIN-Q), up 42 per cent
- Oracle Corp. (ORCL-Q), up 32 per cent
- Micron Technology Inc. (MU-Q), up 30 per cent
- Jabil Inc. (JBL-Q), up 30 per cent
- Advanced Micro Devices Inc. (AMD-Q), up 28 per cent
- ON Semiconductor Corp. (ON-Q), up 25 per cent
- Western Digital Corp. (WDC-Q), up 24 per cent
- Super Micro Computer Inc. (SMCI-Q), up 22 per cent
- Seagate Technology Holdings (STX-Q), up 22 per cent
- Royal Caribbean Cruises Ltd. (RCL-Q), up 22 per cent
As the second-quarter earnings season approaches, earnings growth is expected to come in at 5.8 per cent, according to a report from LSEG published on July 3.
There are several positive standouts. The communication services sector is expected to see 32 per cent year-over-year earnings growth and the technology sector is anticipated to report 18 per cent year-over-year earnings growth. Breaking things down, within the communication services sector, the movies and entertainment sub-industry as well as the publishing sub-industry have forecast earnings growth rates of 224 per cent (yes, triple-digit growth) and 18 per cent, respectively. Within the technology sector, two sub-industries, electronic components and semiconductors, have forecast year-over-year earnings growth rates of 38 per cent and 35 per cent, respectively.
Earnings growth estimates for the balance of the year have remained relatively steady. For the third quarter, earnings growth of 8 per cent is forecast, up fractionally from 7.9 per cent expected last month. And, year-over-year earnings growth for the fourth quarter is expected to come in at 6.3 per cent, up from last month’s 6.2 per cent forecast. Year-over-year earnings growth is anticipated to come in at 8.5 per cent in 2025, jumping to 14 per cent in 2026.
The forward price-to-earnings multiple expanded slightly. According to the July 3 LSEG report, the forward four quarter price-to-earnings multiple for the S&P 500 sits at 22.2 times, up from 21.9 times as of May 30 and 20.5 times as of April 30.
Now, here’s a look at analysts’ target prices, recommendations, forecast returns and yields for all securities in the S&P 500 grouped by sector and ranked according to their expected price returns (excluding dividend and distribution income). The posted target price for each security is an average of all available target prices from analysts. A target price typically reflects an expected share or unit price 12 months from now based on an analyst’s financial modelling, such as a discounted cash flow or sum-of-the-parts model. Data is as of June 30.
It’s important to note that high target prices, which imply stellar returns that seem unbelievable may be just that - unrealistic. At times, when a stock price falls analysts may maintain their bullish expectations, inflating the forecast return. In addition, an outlier (extreme target price) can skew the average target price, to the upside or downside, particularly when the number of analysts covering a stock is low. Don’t let a huge projected gain lure you into a position – it is critical to look at the company and industry fundamentals.
Click here to download an Excel version of the report.
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