Earnings seasons kicks off for real this Thursday with three big U.S. banks JPMorgan Chase & Co (JPM), Wells Fargo & Co (WFC) and Citigroup Inc (C) all set to report.

The first-quarter has been a winner for S&P 500 investors with the large-cap index rising 5.5 percent lead by tech sector which gained 12 percent. The rally was led by Apple Inc (AAPL), which rose 24 percent in the first three months. These healthy returns could see the strongest S&P 500 EPS growth in over five years, Bank of America analysts say.

Despite the Trump administration showing some wobbles at the end of the quarter, macro data remained upbeat. Bank of America says improving ISM numbers, led by new orders, has the economy in good stead and it expects earnings season to surprise to the upside. Even as estimates fall, Bank of America is predicting a $30.35 EPS, 3 percent above the market consensus of $29.44. (See also: First Quarter Analysis: Winners and Losers in Consumer Staples)

Own Financials and Energy

The first quarter was a good one for financials. A combination of the Federal Reserve increasing interest rates (the 10-year yield rose 21 basis points in the quarter) and the deregulation plans from the Republican party helped bank stocks hit multi-year highs. Consensus for the financials sector is a 14.1 percent year-on-year increase.

After a dismal Q1 2016, the energy sector is expected to return year-on-year EPS growth of 723.6 percent. A year ago, the price of oil traded below $30 a barrel for the first time in 13 years. A full-on oil crisis saw profits dive, rigs close and the energy industry suffer one of its worst quarters in history. It was the first sector to record a quarterly loss since financials in 2008.

However, what a year makes. As oil hovers around $50 a barrel, a 50 percent increase from the average Q1 2016 price, expect a sharp rebound in the energy sector. (See also: The Energy Sector Could Offer Earnings Upside)

Market consensus for ex-financials and energy EPS growth is just 3 percent.

Corporate Guidance

Historically, corporates have been reluctant to upgrade consensus for estimates as reporting dates get closer, even as optimism rises. Skeptics say this can distort any upside earnings beat and borders on immoral behavior. However, the current political uncertainty may provide a material excuse this time around. "Corporates typically set a low bar at the beginning of the year, and they may also be hesitant to update their outlooks until they have greater clarity on the likelihood and timing of policy changes by the new administration," Bank of America said in its note.

"Given the lack of progress on policy initiatives thus far, management is unlikely to change guidance on this aspect."


After the three banks report on Thursday, the calendar picks up. Next week 16 percent of S&P 500 companies report, then the following two weeks will see over half of the large cap index report.

Some notables are Apple Inc due May 2, both Microsoft Corp (MSFT) and Amazon.com Inc (AMZN) on April 27 and Facebook Inc (FB) on May 3.

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