I revised my Portfolio Grader recommendations for 143 big blue chip stocks.

The third-quarter earnings announcement season is officially underway.

Market Reaction to Earnings Surprises

For those who follow the market closely, earnings season holds a special appeal. It’s a period when stock performance often reflects actual company fundamentals more accurately. Currently, a major question is whether this season will meet expectations. Early results suggest it could.

According to FactSet, only 14% of S&P 500 companies have reported their earnings thus far, yet approximately 80% have outperformed analyst estimates. This exceeds the five-year average of 77%, with an average earnings surprise of 6.1%.

Typically, large banks are among the first to report earnings, and this year, most of them achieved better-than-expected results. For instance, JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC), Goldman Sachs Group, Inc. (GS), Bank of America Corp. (BAC), Citigroup, Inc. (C), and Morgan Stanley (MS) reported an average earnings surprise of 13.55%.

While these results are encouraging, I have previously expressed my caution towards the banking sector. Having started my career as a banking regulator, I understand that banks can sometimes present inflated figures, which makes me skeptical.

Factors Influencing Future Earnings Growth

Nonetheless, these positive earnings results have implications for the S&P 500. FactSet predicts that the overall earnings growth rate will surpass the existing estimate of 4.1%, potentially reaching nearly 10%. They note that historically, 37 out of the last 40 quarters have ended with better earnings growth rates than initially expected.

Moreover, the S&P 500 has recorded an average earnings surprise of 6.8% over the last decade, with 75% of companies beating earnings estimates. With this historical context, FactSet concludes that the average earnings growth rate increased by 5.5 percentage points over the past ten years, suggesting a bright outlook for this season.

This Week’s Rating Adjustments

Looking ahead, over 100 S&P 500 companies are set to report their quarterly results this week. Notable names include Tesla Inc. (TSLA), General Motors Co. (GM), Coca-Cola Co. (KO), and United Parcel Services, Inc. (UPS). However, I anticipate more significant market movements will occur next week when additional flagship companies release their earnings.

To prepare for this exciting earnings season, I reevaluated the latest trends in institutional buying and assessed each company’s financial health. As a result, I updated my Stock Grader recommendations for 143 major blue chip stocks. Here are a few highlights:

• Seventeen stocks upgraded from Buy (B-rating) to Strong Buy (A-rating).
• Forty stocks upgraded from Hold (C-rating) to Buy (B-rating).
• Seventeen stocks upgraded from Sell (D-rating) to Hold.
• Two stocks upgraded from Strong Sell (F-rating) to Sell.
• Thirteen stocks downgraded from Strong Buy to Buy.
• Twenty stocks downgraded from Buy to Hold.
• Twenty-nine stocks downgraded from Hold to Sell.
• Finally, five stocks were downgraded from Sell to Strong Sell.

For those interested, I have outlined the top ten stocks currently rated as Strong Buys. You can also access a full list of all 143 stocks along with their Fundamental and Quantitative Grades.