Top Finance Stocks Before Q2 Earnings: 3 to Watch Now
As we approach the Q2 earnings season, several finance stocks are positioning themselves as potential outperformers in what continues to be a challenging economic landscape. With interest rates remaining elevated and market volatility creating both obstacles and opportunities, discerning investors are closely watching the financial sector for signs of resilience and growth.
Having spent the past week analyzing earnings forecasts and institutional money flows, I’ve identified three finance stocks that warrant special attention ahead of their upcoming reports. These companies have demonstrated operational strength that could translate into positive surprises when they reveal their second-quarter numbers.
Goldman Sachs (GS): Investment Banking Giant Poised for Recovery
Goldman Sachs has weathered significant headwinds over the past year, but several indicators suggest the investment banking powerhouse may be turning a corner. The company’s trading division has capitalized on market volatility, while cost-cutting measures implemented in late 2023 are beginning to show results on the bottom line.
What makes Goldman particularly interesting this quarter is the long-awaited revival in deal-making activity. After a prolonged drought in mergers and acquisitions, recent data from PitchBook shows a 23% year-over-year increase in global M&A volume for Q2, with Goldman maintaining its position as a lead advisor in several high-profile transactions.
“The pipeline for IPOs and strategic deals has improved substantially compared to last year,” noted Michael Cyprys, analyst at Morgan Stanley, in a recent research note. “Goldman stands to benefit disproportionately from this recovery given their dominant market position.”
The company’s wealth management division also continues to expand, providing more stable revenue streams to balance the inherently volatile investment banking business. With shares trading at a relatively modest 12x forward earnings, Goldman offers an attractive entry point before what could be a positive earnings surprise.
Visa (V): Payment Network Giant Riding Consumer Resilience
Despite persistent inflation and economic uncertainty, consumer spending has remained remarkably resilient—a trend that directly benefits payment processing giant Visa. The company’s vast global network continues to process growing transaction volumes, generating substantial free cash flow with operating margins that consistently exceed 60%.
What’s particularly encouraging ahead of Visa’s Q2 report is the sustained strength in cross-border transactions, which typically carry higher fees. According to the latest data from the U.S. Travel Association, international travel to the United States increased by 18% in the first half of 2024 compared to the same period last year, creating favorable tailwinds for Visa’s high-margin cross-border business.
The company’s strategic investments in fintech partnerships and blockchain technology are also beginning to bear fruit. “Visa has effectively positioned itself as both a legacy incumbent and a fintech innovator,” explains Sarah Kocianski, head of research at fintech consultancy 11:FS. “Their ability to maintain this dual identity gives them a unique advantage in the evolving payments landscape.”
With a rock-solid balance sheet and consistent share repurchase program, Visa offers a compelling combination of growth and defensive characteristics that could shine during this earnings season.
BlackRock (BLK): ETF Dominance Driving Asset Growth
BlackRock, the world’s largest asset manager, enters Q2 earnings season with momentum on multiple fronts. The company’s ETF business, operating under the iShares brand, continues to attract substantial inflows despite intense competition in the low-cost investment space.
What’s particularly notable is BlackRock’s success in the rapidly growing market for active ETFs. According to data from ETFGI, active ETF assets surged to $747 billion globally at the end of May, with BlackRock capturing a significant portion of these higher-margin products.
The company’s investments in artificial intelligence and data analytics are also enhancing its investment processes and operational efficiency. CEO Larry Fink has repeatedly emphasized the transformative potential of AI for the investment management industry, and BlackRock has been at the forefront of implementing these technologies.
“BlackRock’s scale gives them an enormous advantage in the AI arms race,” observes Ben Johnson, director of global ETF research at Morningstar. “They have the resources to invest in cutting-edge technologies while maintaining their fee advantage over competitors.”
The recent approval of spot Bitcoin ETFs has been another tailwind, with BlackRock’s iShares Bitcoin Trust (IBIT) attracting billions in assets since its January launch. This new revenue stream, combined with the company’s diverse business mix across active and passive strategies, positions BlackRock well for the upcoming earnings report.
Investment Implications
While these three finance stocks appear well-positioned heading into earnings season, investors should remember that surprises—both positive and negative—are common during reporting periods. Market reactions often depend not just on absolute performance but on results relative to expectations.
That said, the financial sector offers compelling value compared to other areas of the market, particularly technology. With solid fundamentals, reasonable valuations, and the potential for positive earnings surprises, Goldman Sachs, Visa, and BlackRock deserve consideration for investors looking to bolster their financial sector exposure ahead of what could be a revealing earnings season.
The Fed’s interest rate decisions in the coming months will undoubtedly impact the trajectory of these companies, but their strong market positions and diversified revenue streams should provide resilience regardless of the exact path of monetary policy.
