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For Q2 2015, year-over-year earnings for the S&P 500 are projected to decline by 4.7%. The Energy sector is expected to be the largest contributor to the earnings decline for the index for the quarter, as the sector is projected to report a year-over-year decrease in earnings of 60.5%. If the Energy sector is excluded from the index, the S&P 500 would be projected to report earnings growth of 2.0%.

Given the decline in the price of oil from year-ago levels, how long is the Energy sector projected to be a drag on earnings growth for the S&P 500? When is the sector projected to be a positive contributor to earnings growth for the index?

For the remainder of 2015, the Energy sector is expected to continue to be the largest detractor to earnings growth for the S&P 500.

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For Q3 2015, year-over-year earnings for the S&P 500 are projected to decline by 0.9%. The Energy sector is expected to be the largest contributor to the earnings decline for the index for the quarter, as the sector is projected to report a year-over-year decrease in earnings of 58.5%. If the Energy sector is excluded from the index, the S&P 500 would be projected to report earnings growth of 6.4%.

For Q4 2015, year-over-year earnings for the S&P 500 are projected to increase by 4.7%. The Energy sector is expected to be the largest detractor to earnings growth for the index for the quarter, as the sector is projected to report a year-over-year decrease in earnings of 38.7%. If the Energy sector is excluded from the index, the projected earnings growth rate for the S&P 500 would jump to 8.4%.

For all of 2015, the S&P 500 is projected to report earnings growth of 1.6%. The Energy sector is predicted to be the largest detractor to earnings growth for the index for the year, as the sector is expected to report a year-over-year decline in earnings of 55.2%. If the Energy sector is excluded from the index, the projected earnings growth rate for the S&P 500 would improve to 8.4%.

Starting in Q1 2016, however, the Energy sector is projected to be a positive contributor to earnings growth for the S&P 500.

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For Q1 2016, year-over-year earnings for the S&P 500 are projected to increase by 8.4%. The Energy sector is expected to be a positive contributor to earnings growth for the index for the quarter, as the sector is expected to report a year-over-year increase in earnings of 16.0%. If the Energy sector is excluded from the index, the projected earnings growth rate for the S&P 500 would fall to 8.0%

For all of 2016, the S&P 500 is projected to report earnings growth of 12.1%. The Energy sector, due to a combination of higher projected earnings and the easier comparison to lower earnings in 2015, is predicted to be the largest contributor to earnings growth for the S&P 500 for the year. The sector is projected to report year-over-year growth of 34.4%, which is the largest estimated earnings growth rate of all ten sectors. If the Energy sector is excluded from the index, the projected earnings growth rate would decrease to 11.0%.

If these earnings projections for 2016 prove to be accurate, the Energy sector will be a positive contributor to annual earnings growth for the S&P 500 in 2016 for the first time since 2011.

Read more about earnings trends in this edition of FactSet Earnings Insight. Visit www.factset.com/earningsinsight to launch the latest report.

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Senior Earnings Analyst
John’s weekly research report, Earnings Insight provides analysis and commentary on trends in corporate earnings data for the S&P 500, including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, Financial Times, The New York Times, MarketWatch, and Yahoo! Finance.

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