S&P 500 (^GSPC) companies reported what was widely considered to be a solid first quarter for the index, with one notable exception: drugmaker Bristol-Myers Squibb (BMY). Masu.
Last month, the company posted a huge loss per share in the first quarter due to costs related to a series of acquisitions and cut its full-year profit forecast.
With 92% of S&P companies complete reporting, the index is on pace for 5.4% year-over-year earnings growth, the index's second-highest year-over-year earnings growth in 2022. This is the largest increase since the quarter. That pace will jump to 8.3%, said John Butters, senior revenue analyst at FactSet.
Overall, Healthcare sector (XLV) revenues were down 25.4% year-over-year, matching the drop in Energy (XLE) and making it the worst performer in the S&P 500 this quarter.
If you exclude several other companies from this sector, the S&P 500's earnings growth would be even greater. Butters also calculated the index's numbers excluding Pfizer (PFE) and Gilead Sciences (GILD). Gilead Sciences reported a loss of $1.32 in the most recent quarter, compared to earnings of $1.37 in the same period last year. Meanwhile, Pfizer reported earnings per share of $0.82, down from $1.23 in the year-ago period.
Excluding these two companies and Bristol-Myers Squibb, the S&P 500 index would be aiming for 9.7% earnings growth, according to Butters' analysis.
What's interesting is that the revenue is decreasing. It had no impact on the sector's overall performance last month. The healthcare sector posted a modest 1.4% gain last month, making it the fourth-best performer among all sectors and outpacing the S&P 500's 1.2% return over the same period.
This is because the sector's revenue decline is not expected to continue. After Bristol-Myers Squibb reported a huge loss stemming from its acquisition of Karuna Therapeutics, analysts said the company rebounded to $1.69 per share in the second quarter, compared with $1.75 a year earlier. is expected to decrease from
Earnings across the sector are expected to recover in the second quarter.Healthcare is expected to have the second-highest year-over-year growth rate among all sectors in the second quarter, with Wall Street consensus expecting 17.2%, according to FactSet data.
Tom Lee, Fundstrat's head of research, said in a May 10 note to clients that the currently expected recovery in Healthcare, Energy & Materials (XLB) stocks is a “tailwind for stocks.”
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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