Bull Market Set for Further Gains on Earnings: Stocks to Watch

Corporate earnings are one of the primary fundamental drivers of stock market returns over time. This year has provided us with more evidence that this latest bull market is being supported by a resilient corporate backdrop, thanks in large part to the tech sector amid an investment boom in artificial intelligence.

While notable risks remain in this environment including lingering inflationary pressures and recent softness in the labor market, the underlying strength of corporate America should, at the very least, offer investors a sense of reassurance as we approach the final quarter of 2025.

Let’s delve a bit deeper into the earnings picture and see what we can learn about its impact on stocks in the months and years ahead.

The Earnings Outlook Remains Robust

Earnings have been the steady engine throughout this multi-year bull market, which has broadened out in 2025 and is now approaching its third birthday.

Total earnings growth in the prior quarter (Q2) came in at 12.5% from the same period last year on 6.2% higher revenues, both of which handily beat estimates. The takeaway here is that despite a host of concerns including tariff-related headwinds, companies performed very well.

As we can see, the revenue growth pace represented an improvement over what we had seen in other recent periods. The picture that emerged from this latest earnings season was one of strength amid an improving outlook, with companies not only coming in ahead of estimates, but with many also providing reassuring guidance for the coming quarters.

Total S&P 500 earnings for the current period (Q3) are expected to be up 5.1% from the same period last year on 6% higher revenues. Now, this would be an EPS deceleration relative to Q3 of 2024, with earnings growth expected to reaccelerate in the coming quarters.

The Q3 earnings estimate revisions trend has remained mainly positive since the April-May timeframe. Particularly over the last two months, analysts have revised estimates back higher.

The third-quarter reporting season will really kick off in mid-October with the big banks. Since the start of July, we’ve seen Q3 estimates increase for 5 of the 16 Zacks sectors, which include sectors like technology and financials. The fact that we’re seeing positive revisions in the more aggressive pockets of the market is bullish in our view.

On the flip side, we’re seeing negative revisions in defensive areas like staples and healthcare, but remember that these downward revisions of forward estimates are something we’ve seen many times in the past. They aren’t necessarily a bad thing, as they give companies a bit more wiggle room to beat estimates once the next reporting season rolls around.

Looking at the overall earnings picture on an annual basis, total S&P 500 earnings are expected to increase 9.3% on 4.1% higher revenues in 2025. Not only does the earnings outlook remain strong, but growth is expected to accelerate in the coming years.

The earnings recession from a few years ago is clearly in the rearview mirror and the ongoing secular bullish trend has now resumed. With stocks hitting new highs, we’re witnessing a return to growth, with double-digit EPS figures expected on a calendar-year basis in 2026 and 2027.

All in all, the underlying message is certainly one of strength on the earnings front, which is exactly what’s needed for the sustainability of this latest rally.

Stocks to Watch

Electronics manufacturer Jabil JBL delivered its fiscal Q4 results this morning. The company posted quarterly earnings of $3.29 per share, beating the $2.95/share Zacks Consensus Estimate by 11.5%.

Jabil, which belongs to the Zacks Electronics - Manufacturing Services industry, posted revenues of $8.25 billion for the quarter ended August 2025, surpassing the Zacks Consensus Estimate by 7.67%. This compares to year-ago revenues of $6.96 billion. The company has topped consensus revenue estimates in each of the last four quarters.

Jabil shares were down about 3% in pre-market trading but remain up more than 50% on the year.

Meanwhile, leading discount retailer Costco COST is set to report its fiscal fourth-quarter results after the closing bell on Thursday. The company is expected to earn $5.81 per share, reflecting 12.8% growth relative to the year-ago period on 8.2% higher revenues ($86.23 billion).

One of the largest warehouse club operators in the United States, Costco’s distinguished membership-based business model differentiates it from traditional competitors. The Washington-based retailer’s emphasis on bulk sales and efficient inventory management allows it to keep prices low, making it a favored shopping destination for budget-conscious consumers.

Costco is currently a Zacks Rank #3 (Hold) stock. Shares have been lagging lately with the stock up less than 4% this year, far behind Walmart's 14.5% gain and the S&P 500 index's 13% advance.

Costco's latest results will offer perspective on membership trends and consumer behavior across different income segments, which are of particular importance given the retailer's value-focused positioning.

Final Thoughts

We generally want to remain patient in bull markets. If we become overly concerned about every possible threat or concern in this market environment, we can end up harming our long-term returns.

The bull market is on track to turn 3 in October. Over the past 50 years, there have been 5 other bull markets that made it past their 2^nd birthday. The average one made it 8 years, with the shortest an impressive 5 years. If the bull market remains in place, our patience should be rewarded.

Disclosure: Jabil is a current holding in the Zacks Headline Trader portfolio.

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This article originally published on Zacks Investment Research (zacks.com).

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