The end of the month of May marked a change in sector-level P/E ratios for the index, as the Consumer Discretionary sector surpassed the Telecom Services sector as the sector with the highest month-end, forward 12-month P/E ratio. Companies with the highest forward 12-month P/E ratios in the Consumer Discretionary sector include Amazon.com (132.9), Netflix (101.4), Cablevision (54.0), TripAdvisor (32.2), and Chipotle Mexican Grill (31.1).
The estimated earnings growth rate for Q2 2013 is 1.3% this week, unchanged from last week’s growth rate of 1.3%. On March 31, the Q2 earnings growth rate for the index was 4.5%. Eight of the ten sectors have witnessed a decline in earnings growth rates since that date, led by the Materials, Information Technology, and Industrials sectors. Only the Financials and Utilities sectors have seen increases in expected earnings growth rates since the start of the quarter.
Part of the reason for the drop in expected earnings growth is the high percentage of negative guidance issues by S&P 500 companies for Q2. Overall, 86 companies have issued negative EPS guidance for Q2 2013, while 20 companies have issued positive EPS guidance. Thus, 81% of the companies in the index that have issued EPS guidance have issued negative guidance. This percentage is well above the 5-year average of 62%.
If the final earnings growth rate for the quarter is 1.3%, it will mark the third consecutive quarter of growth for the index. However, only four of the ten sectors are projected to report an earnings increase for the quarter, led by the Financials (17.3%) and Telecom Services (11.2%) sectors. On the other hand, the Information Technology (-6.3%) and Health Care (-4.0%) sectors are predicted to see the lowest earnings growth. The estimated revenue growth rate for the index for Q2 is also 1.3%, down from an estimate of 2.6% at the start of the quarter.
The peak weeks of the Q1 2013 earnings season are now finished. During the upcoming week, two S&P 500 companies are scheduled to report earnings for Q1 2013.