Earnings Season Update: August 2, 2019

To date, 77% of the companies in the S&P 500 have reported actual results for Q2 2019. In terms of earnings, the percentage of companies reporting actual EPS above estimates (76%) is above the five-year average. In aggregate, companies are reporting earnings that are 6.0% above the estimates, which is also above the five-year average. In terms of sales, the percentage of companies (59%) reporting actual sales above estimates is below the five-year average. In aggregate, companies are reporting sales that are 1.0% above estimates, which is above the five-year average.

The blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings decline for the second quarter is -1.0% today, which is smaller than the earnings decline of -2.7% last week. Positive earnings surprises reported by companies in multiple sectors (led by the Energy and Health Care sectors) were responsible for the decrease in the overall earnings decline during the week. If -1.0% is the actual decline for the quarter, it will mark the first time the index has reported two straight quarters of year-over-year declines in earnings since Q1 2016 and Q2 2016. Four sectors are reporting year-over-year growth in earnings, led by the Health Care and Financials sectors. Seven sectors are reporting a year-over-year decline in earnings, led by the Materials, Industrials, and Information Technology sectors.

The blended revenue growth rate for the second quarter is 4.1% today, which is above the revenue growth rate of 3.9% last week. Positive revenue surprises reported by companies in the Energy and Health Care sectors were mainly responsible for the increase in the overall revenue growth rate during the week. If 4.1% is the final growth rate for the quarter, it will mark the lowest revenue growth rate for the index since Q3 2016 (2.7%). Eight sectors are reporting year-over-year growth in revenues, led by the Communication Services and Health Care sectors. Two sectors are reporting a year-over-year decline in revenues, led by the Materials sector. One sector (Industrials) is reporting no growth (0%) in revenue.

Looking at the second half of 2019, analysts see a decline in earnings for the third quarter followed by mid-single-digit earnings growth in the fourth quarter.

The forward 12-month P/E ratio is 16.8, which is above the 5-year average and above the 10-year average.

During the upcoming week, 64 S&P 500 companies (including 1 Dow 30 component) are scheduled to report results for the second quarter.