Earnings Expectations on S&P 500
Wow! It seems like this quarterly went by in a flash. There’s been a lot of focus on Greece and lots of head scratching about the timeframe for rates rising. Let’s take a moment and focus on 2Q15 earnings expectations & schedule.
2Q15 earnings season is not expected to be a good one. The S&P was up 1.9% while revenues were down 3.2% last quarter (1Q15) and guidance was negative.
Breaking down the Sectors
Healthcare, Financials and Consumer Discretionary sectors are expected to report positive results
Energy, Consumer Staples and Industrials are expected to report negative results.
The earnings estimate for all sectors, year-over-year (yoy) is -3.8%.
Energy projections were raised given the rebound in oil prices. But the sector is far from stellar with RBC expecting a 63% drop in earnings (y-o-y). Industrial projections have been lowered in the face of economic activity.
Consumer Spending hasn’t been as robust as expected given lower oil prices. But consumers are out and spending and is expected to continue to be a positive variable. A good drill down on Consumer spending through year end, Business Insider did an excellent piece you can read here.
The dollar will continue to be an issue for earnings. While Multinationals have direct FX exposure, even US focused entities can’t help but get a knock-on effect.
Given a ~20% increase in USD (see below) the translation effect alone will be substantial especially now that a greater percentage of sales are from outside the U.S. (referring only to 500 companies in the S&P 500)
The yoy (2Q14 vs 2Q15) changes are*:
2Q14: EURUSD = $1.37; USDJPY = Y102.10
2Q15: EURUSD = $1.10; USDJPY = Y121.42
Y-O-Y : USD stronger ~20% versus both EUR & JPY
* FactSet levels used to reflect levels used to calculate earnings
Earnings Report Schedule
Business Insider – a welcomed source of useful information, disseminated the histogram below showing earnings release week for S&P 500 companies.
Buybacks are expected to continue to be announced. Although buybacks aren’t the most shareholder friendly use of cash, they tend to provide a supporting bid for those stocks. Thus when announced, the stocks outperform.
We’ve grown used to the negative expectations/positive acualization game. Any company reporting better than expected earnings (depending on how the chart looks) are likely to rise after earnings release.
So, the next weeks will provide a lot of data to parse.
Updates to follow….