The S&P500’s financial sector rose 2.30% in the third quarter, lagging behind the wider markets, which gained nearly 8%. On a year-to-date basis, the Financial Select Sector SPDR Fund ETF (NYSEARCA:XLF) has advanced 8.75% trailing behind the S&P500 index’s 11.41% rise.
As companies gear up for the earnings season, analysts expect the S&P500 to report earnings growth above 13% marking the 4th straight quarter of double-digit growth, as per a Factset report.
The financials sector is projected to report an earnings growth rate of 13.2% this quarter, the fourth-highest on a YY basis among all eleven sectors. The financial sector will be under investors’ radar this week, with 65% of the S&P 500 companies scheduled to report their Q3 print, including American Express (NYSE:AXP), Bank of America (NYSE:BAC), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), JPMorgan Chase (NYSE:JPM), and Morgan Stanley (NYSE:MS).
“At the industry level, all five industries in the sector are expected to report year-over-year earnings growth. Four of these five industries are predicted to report double-digit growth: Consumer Finance, Insurance, Capital Markets, and Financial Services,” Factset said.
Seeking Alpha’s quant rating system gives the financial sector an average health score of 3.36. The ratings are based on quantitative metrics such as valuation, earnings growth, and recent stock performance, with a maximum possible score of 5 for any individual company.
Overall, 14 stocks within the sector had a Buy and above rating, five carried a Sell suggestion, and 51 had a Neutral rating.
Industry heavyweights like Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) had quant ratings of 3.36, 3.37 and 3.38 respectively.
The top spot in the list was shared by The Allstate Corporation (NYSE:ALL) and Capital One Financial (NYSE:COF) with a quant rating of 4.90.
Allstate has been graded A+ for growth, A for profitability and has a C- for valuation. Meanwhile, Capital One, despite scoring an A+ for profitability, was pulled a notch lower by a D grade for valuation.
Seeking Alpha analyst Arbitrage Trader maintained its Hold rating for the stock on the back of its strong credit ratings and a 31-year dividend payment streak. Earlier this month, the company appointed Mario Rizzo as COO while John Dugenske took over as interim CFO.
FactSet Research Systems (NYSE:FDS) was the lowest on the list with a quant rating of 1.17. Erie Indemnity (NASDAQ:ERIE) was only slightly better with a rating of 1.19.