Double your money: 11 firms' profits up 100%
It's been an ugly quarter for profit, unless you're a company like Amazon (AMZN) and your bottom line just doubled.
Such huge profit gains offer stark contrast to the overall S&P 500's roughly 6% profit decline. Earnings growth has vanished for the S&P 500 and the first quarter marks the third consecutive earnings decline, S&P Global says.
Some hope the big gains by some companies are the harbinger of better earnings growth later in the year. "Many see the (first-quarter) earnings season as the inflection point for corporate earnings, with the growth picture starting improve from (the second quarter) onwards and turning positive in the back half of the year," according Sheraz Mian, director of research at Zacks Investment Research, in a note to clients.
Amazon.com is one of just 11 companies in the Standard & Poor's 500 index, including building-material producer Martin Marietta Materials (MLM), alternative energy firm First Solar (FSLR) and vehicle maker Ford Motor (F), that completely bucked the profit malaise affecting the market, according to a Paste BN analysis of data from S&P Global Market Intelligence. Each of these companies' adjusted first-quarter profit has jumped 100% or greater from levels from a year ago.
Amazon set the standard for the maximum a company's profit could jump in the first quarter. The online retailer and provider of cloud computing services to other companies saw its adjusted profit jump to $1.07 a share in the first quarter, up dramatically from the 12 cents a share it lost in the same period a year ago. Much of the big increase in profit is due to Amazon's cloud offering, called AWS or Amazon Web Services, which grew 64% from the same period a year ago, according to research from Credit Suisse.
But it's not all about fast-growing technology companies. Martin Marietta Materials, which provides everything from asphalt products to granite and limestone, was second to Amazon in terms of adjusted earnings growth with adjusted profit leaping to 70 cents a share from 9 cents a year in the same period last year. Demand and prices for the company's products improved as the company benefits from a "rapidly improving construction market" in addition to weather that was more conductive to construction in key markets in the southeast and Texas, says Garik Shmois, analyst at Longbow Research.
Much of the strong growth is coming from companies that make or sell items consumers want, but not necessarily need. Four of the 11 companies are in the consumer discretionary sector, which is more than any other. And not surprisingly, 10 of the companies' profits jumped so much they beat expectations.
But while these companies might be making more money hand over fist, that doesn't mean investors are. On average, these profit dynamos' stocks are down about 2.7% this year so far, highlighting how more than profit growth is driving this market. Investors hope more companies - not just these few - will see earnings growth regain their gusto soon. "We believe prospects for earnings growth will improve as we get further into 2016 and distance ourselves from the sharp drop in energy prices," says Katie Nixon, chief investment officer at Northern Trust, in a note to clients.
Follow Matt Krantz on Twitter @mattkrantz