Q3 Forecasts Hint At P/C Gain

The earnings season starting in a few weeks will be a critical one for the economic recovery. It is likely to provide evidence supporting or rebuff the army of analysts and economists who forecast a recovery to begin in earnest during the second half of 2009.

Which sectors are shaping up the best?

A screen of stocks trading above $10 with earnings expected to grow 20% or more over last year's Q3, according to Thompson/Reuters consensus estimates, turned up 535 stocks.

Almost half the results fell in the technology, financial and health care sectors.

Earnings don't always decide a stock's behavior. Sales can fall; outlooks can be grim. But EPS expectations can give a sense of how the market will greet the next earnings season.

There may be a few surprises.

Property and casualty insurers, ranked No. 145 in Wednesday's IBD, held 20 stocks priced above $10 and forecast to grow earnings, as a group, by more than 20% for the coming quarter, easily more than any other industry group.

Enterprise software makers, ranked No. 62, was next in line with 15 stocks. Fourteen stocks in the No. 121-ranked Retail-Restaurant group hold EPS forecasts above 20%.

Three groups -- investment brokers, medical products and medical-dental services -- each held 10 stocks.

The biggest share of top forecasts among current top 20 industries came from clothing and shoe retailers, ranked No. 20, which had 12 names on the list.