Watch what they say, not what they do. That s the way many market watchers are approaching the upcoming earnings season, which unofficially kicks off Monday when Alcoa reports its second-quarter results. Most sectors should deliver a strong quarter, but guidance for the second half of the year will be what drives the market s reaction, analysts say.

The second quarter marks the end of a string of easy year-over-year comparisons for many companies, says Tom Samuels, portfolio manager for the Palantir Fund. I think the market is much more concerned about what the second half looks like, and will it live up to expectations, Samuels says.

Companies that deliver strong earnings but offer weak guidance could see their stock prices drop, says Dave Rovelli, the managing director of U.S. equities for Canaccord Genuity.

On Wednesday, Family Dollar Stores delivered a 24.2% year-over-year increase in earnings per share for its fiscal third quarter, but projected fourth-quarter earnings only 6% to 18% above the same period last year. The stock dropped 8%.

It doesn t matter if earnings are good, Rovelli says, it s the outlook that s all that matters.

The upshot of a weaker second half could be a flight toward stocks with solid fundamentals, Samuels says. Companies with accelerating profits, positive free cash flow and low debt may start to outperform at the expense of companies that don t meet those criteria, he says. The disparity between the winners and losers could be dramatic, Samuels says. Investors should watch and compare the performances of the S&P 600 and the S&P 500 index for signs that money is moving out of small caps and into safer, larger names, says Doug Roberts, chief investment officer at Channel Capital Research.

Here s a look at earnings-season expectations for four key sectors.

Semiconductors

Semis always lead the market, Rovelli says. They re always going to rally first, and they re always going to sell off first. Second-quarter earnings are likely to be in line with expectations in this sector, but guidance is likely to disappoint, Rovelli says.

The sector has been benefitting from a strong inventory re-stocking cycle, but for six quarters now these companies have been shipping above demand, and inventory has now rebounded too far relative to underlying economic strength, says Daniel Berenbaum, an analyst with Auriga USA. Intel could benefit from a strong product cycle in servers, which use higher-priced and higher-margin chips, he says. On the other hand, Advanced Micro Devices has been losing market share to Intel in that space, he says. Overall, the sector carries some downside risk as expectations for the second half of the year still appear too high, Berenbaum says.

Movement in energy-sector ETFs suggests that investors expect very strong second-quarter results, says Jim Porter, a managing member with the Aston/New Century Absolute Return ETF Fund. Oil prices have come down a bit in the second quarter, but the trend going forward isn t clear, Samuels says. Energy is basically trading with the market, Rovelli says. If we have a double-dip recession, energy s going to get clobbered.

In addition to potential economic weakness in the second half, political questions about the future of deepwater drilling could weigh on the sector despite solid earnings, Roberts says. Investors should watch for red flags in commentary, as companies with drilling operations might start to disclose future risks to revenue from new restrictions, Roberts says.

Financials

Investors aren t showing as much enthusiasm about the financial sector heading into earnings season, Porter says. The sector is hiding behind a couple of names that are making huge amounts of money, Samuels says. JPMorgan Chase aside, trends for consumer banking and asset management companies are troubling, and the sector could see some misses in the second quarter, Samuels says.

Here, too, investors should watch management commentary for clues on how much these companies believe financial reform will impact earnings going forward, Roberts says.

Consumer discretionary

This sector is particularly likely to deliver disappointing guidance, Samuels says. We re not as concerned about the top line in consumer discretionary, but the underlying trends seem to have some incremental pressure on the bottom line, he says. Companies are facing pressure on the price they can command for their products, Samuels says. For example, airline and other travel prices appear to have peaked, he says.

Consumer psychology also plays a role. The consumer is still price-sensitive, says Brian Sozzi, an analyst at Wall Street Strategies. The retail sector could deliver a few misses this earnings season, as retailers have had to run aggressive promotions to drive sales, Sozzi says. After keeping inventory tight in 2009, many retailers have started raising their orders, and they may have gotten ahead of the consumer, he says. American Eagle Outfitters is at particular risk of disappointing expectations, and Wal-Mart may come in at the low end of its guidance, Sozzi says, adding that Home Depot and Target could have positive surprises in store.

With many retailers not set to report earnings until mid-August, interested investors can simply go to the mall and look for deep discounts through the rest of July that will signal retailers are pushing to clear out inventory before the back-to-school season starts, Sozzi says. If the consumer was back and this was 2007, you would not be seeing 30% to 50% off on the front of Ann Taylor, he says.