Over the past year, S&P 500 earnings have been suffering mostly from the plunge in oil prices and the strength of the dollar since last summer. This syndrome may continue for a while given the renewed weakness in oil prices and strength in the dollar.
Let’s calculate the y/y percent change in the 10 S&P 500 sectors during Q2 based on the blend of the available actual and analysts’ estimated earnings. Here is what we find:
Consumer Discretionary (12.0% vs. 7.1% at the start of the Q2 earnings season on July 1st), Consumer Staples (0.2 vs. -2.9), Energy (-56.2 vs. -62.8), Financials (20.7 vs. 14.8), Health Care (11.5 vs. 4.1), Industrials (-1.3 vs. -1.1), Information Technology (5.5 vs. 2.1), Materials (8.5 vs. 4.9), Telecommunication Services (9.3 vs. 5.5), and Utilities (4.5 vs. 0.5).
Three of the sectors are up with double-digit gains. All but Industrials are turning out to be better than was expected at the start of the earnings season. S&P 500 earnings was expected to be down 3.0% y/y during Q2 at the start of the season. The latest numbers show a gain of 1.6%. Excluding Energy, it is up 10.2%. That’s impressive and follows a similar pattern as during Q1, when S&P 500 earnings rose 1.5%, but 11.5% excluding Energy.
The recent renewed weakness in the price of oil could continue to weigh on Energy earnings through the end of this year. The renewed strength in the dollar in recent weeks could also weigh on the overall S&P 500, where at least 50% of revenues comes from overseas. I did cut my earnings estimates for 2015 and 2016 sharply at the end of 2014 and again early this year to reflect the negative impacts of lower oil prices and a stronger dollar. I may have to trim a little more, but I am not doing so just yet.
Today's Morning Briefing: China’s Critical Mess. (1) Fukushima Syndrome. (2) China’s central bankers and central planners have a credibility problem. (3) Trump dumps on China too. (4) Endgame scenario making a comeback. (5) From critical mess to critical mass. (6) The US is a net winner. (7) Need a magnifying glass to see Eurozone recovery. (8) China has two options. (9) Hold the MSG. (10) Earnings are fine excluding Energy. (11) Upside Q2 earnings surprises aren’t surprising. (12) Another Chinese fire drill at the FOMC? (More for subscribers.)
Let’s calculate the y/y percent change in the 10 S&P 500 sectors during Q2 based on the blend of the available actual and analysts’ estimated earnings. Here is what we find:
Consumer Discretionary (12.0% vs. 7.1% at the start of the Q2 earnings season on July 1st), Consumer Staples (0.2 vs. -2.9), Energy (-56.2 vs. -62.8), Financials (20.7 vs. 14.8), Health Care (11.5 vs. 4.1), Industrials (-1.3 vs. -1.1), Information Technology (5.5 vs. 2.1), Materials (8.5 vs. 4.9), Telecommunication Services (9.3 vs. 5.5), and Utilities (4.5 vs. 0.5).
Three of the sectors are up with double-digit gains. All but Industrials are turning out to be better than was expected at the start of the earnings season. S&P 500 earnings was expected to be down 3.0% y/y during Q2 at the start of the season. The latest numbers show a gain of 1.6%. Excluding Energy, it is up 10.2%. That’s impressive and follows a similar pattern as during Q1, when S&P 500 earnings rose 1.5%, but 11.5% excluding Energy.
The recent renewed weakness in the price of oil could continue to weigh on Energy earnings through the end of this year. The renewed strength in the dollar in recent weeks could also weigh on the overall S&P 500, where at least 50% of revenues comes from overseas. I did cut my earnings estimates for 2015 and 2016 sharply at the end of 2014 and again early this year to reflect the negative impacts of lower oil prices and a stronger dollar. I may have to trim a little more, but I am not doing so just yet.
Today's Morning Briefing: China’s Critical Mess. (1) Fukushima Syndrome. (2) China’s central bankers and central planners have a credibility problem. (3) Trump dumps on China too. (4) Endgame scenario making a comeback. (5) From critical mess to critical mass. (6) The US is a net winner. (7) Need a magnifying glass to see Eurozone recovery. (8) China has two options. (9) Hold the MSG. (10) Earnings are fine excluding Energy. (11) Upside Q2 earnings surprises aren’t surprising. (12) Another Chinese fire drill at the FOMC? (More for subscribers.)
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