A hint in 3rd-quarter earnings calls suggests S&P 500 corporate profits are about to boom, Bank of America says

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• Bank of America says a jump in mentions of “bottom” in earnings calls is a positive sign.
• And mentions of “weak demand” fell to a two-year low.
• “We believe the election could be a clearing event for companies to unleash capex,” a strategist said.

Executives have been dropping hints in third-quarter earnings calls that suggest corporate profits will surge in 2025, Bank of America said.

Savita Subramanian, a strategist at the bank, said in a Monday note that with more than one-third of S&P 500 companies having reported results, mentions of the word “bottom” on earnings calls had surged.

“Companies have been operating in a weak demand environment for almost two years now due to the weakness in goods/manufacturing. But we see signs that the worst may be behind us,” Subramanian said.

Bank of America scanned the transcripts of third-quarter earnings calls and found a 56% year-over-year increase in the word “bottom” being mentioned.

On top of that, mentions of “weak demand” have dropped to a two-year low, a good sign for cyclical companies in the manufacturing economy.

“Historically, a jump in ‘bottom’ mentions has often marked an inflection in EPS,” Subramanian said.

Notable surges in the word “bottom” on earnings calls in 2009 and 2020 were soon followed by a more than 75% year-over-year surge in S&P 500 quarterly earnings per share, the note said.

Bank of America

These signals suggest to Subramanian that manufacturing activity will pick up in the first half of next year, with the Fed likely to continue lowering interest rates and uncertainty about the presidential election passing.

Subramanian said that the word “election” being mentioned on earnings calls had soared 62% compared with the 2020 election cycle, which she said suggested “a potential ‘wait-and-see’ investment approach given the uncertainty.”

“Interestingly, history suggests that investment activity typically accelerates post-election,” Subramanian said. “We believe the election could be a clearing event for companies to unleash capex, especially with lower rates.”