What industry does Wall Street favor the most as the fourth quarter approaches?
According to FactSet, analysts are most optimistic about the energy industry, with a "buy" rating ratio of 64%. Conversely, the outlook for non-essential consumer goods is the most pessimistic, with the lowest "buy" rating ratio at 45%.
For consumers, the prices of oil and natural gas remain high, but as we enter the fourth quarter, Wall Street analysts are recommending buying related stocks.
Energy sector is highly favored
According to an analysis report by FactSet, among all the industries tracked by the company, analysts are most bullish on the energy sector, with a "buy" rating of 64%. In contrast, the report states that the view on non-essential consumer goods is the most pessimistic, with a "buy" rating of only 45%.
The report states that oil industry giants Schlumberger and Halliburton Co. are the most favored S&P 500 component stocks by analysts.
Schlumberger has a "buy" rating of 94%, while Halliburton has a "buy" rating of 93%. Other top 10 ranked companies include Delta Air Lines, Amazon, and Nvidia.
The rise in prices of commodities such as oil, coupled with rising interest rates, has limited people's purchasing power elsewhere - affecting businesses in the retail, hospitality, automotive manufacturing, restaurant, and other non-essential consumer goods industries.
WTI crude oil for October delivery closed above $90 per barrel on Friday, marking the highest near-month price since November last year. Oil prices have risen due to production cuts by Saudi Arabia and Russia.
As the third-quarter earnings season approaches, Wall Street analysts generally expect an increase in profits for S&P 500 component companies - albeit with a small growth rate.
Data from FactSet shows that earnings per share are expected to grow by 0.2% in the third quarter. They forecast a growth of 8.2% in earnings per share for the fourth quarter, but this expectation is generally trending downward as more quarterly results are released.