The big banks kicked off earnings season with a bang this week, and if Bank of America is correct, investors should expect the strong results to keep rolling in.
Even after suprisingly strong first-quarter results, the bank’s head of US equity strategy, Savita Subramanian, says Wall Street can expect companies clear the high bar they’ve set for themselves.
“Aſter a blowout 1Q (S&P 500 EPS +27% YoY), consensus expects S&P 500 EPS to grow 22% YoY in 2Q. Expectations are elevated, but we see no signs of earnings momentum rolling over,” she wrote in a note to investors on Monday.
Importantly, while investors will be closely watching capex from Big Tech—Subramanian highlighted that Amazon, Alphabet, Microsoft, Meta and Oracle, are all expected to spend more than 40% than Wall Street initially projected at the start of the year— other areas of the market will also deliver for investors this season.
Here’s what the bank is watching.
Energy joins the party
The analyst said that her team sees another sector joining tech in driver’s seat this quarter. The energy sector has surged this year. The sector is the top performing segment of the S&P 500, and BofA sees the momentum continuing to drive growth through the coming quarter.
“Tech and Energy continued to drive estimates higher ahead of reporting, guidance and revision trends are near post-COVID highs, both ISM PMI surveys are in expansionary territory,” she wrote.
Subramanian added that BofA expects to see overall earnings-per-share reach $85.50 for Q2, a 28% year-over-year increase and 5% higher than the Wall Street consensus. Her team has raised its full-year earnings forecast for 2026 from $335 to $345, up 26% year-over-year.
Macro data and early reporter results are solid
As Subramanian also highlighted, earnings season has been strong early on. Even prior to the deluge of strong earnings from big banks that reported on Tuesday, of the companies that already reported, 83% came in above expectations for EPS and 72% beat estimates on sales figures. 61% of these companies managed to successfully beat estimates on both metrics.
“Early reporters are concentrated in Consumer and Tech but can oſten give a read on the full quarter’s results,” Subramanian wrote.
The analysis also flagged supportive macro trends. Indeed, the latest reading of the consumer price index on Tuesday backs this up, with consumer price inflation cooling more than expected in June.
Encouraging guidance trends
Over the past three-month period, more companies have delivered higher-than-expected guidance than have come in below estimates by roughly 1.4 to 1, close to the strongest ratio since 2021.
The most upbeat guidance has come from companies in the tech and financial sectors, while consumer discretionary and material stocks have posted the weakest forecasts. Subramanian regards this as promising.
“Quarterly guidance trends in the quarter leading up to reporting have historically been positively correlated with the magnitude of the S&P 500’s EPS surprise,” she noted.
