Earnings Season Update, July 19, 2019

To date, 16% 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 (79%) is above the five-year average. In aggregate, companies are reporting earnings that are 7.0% above the estimates, which is also above the five-year average. In terms of sales, the percentage of companies (62%) reporting actual sales above estimates is above the five-year average. In aggregate, companies are reporting sales that are 0.9% above estimates, which is also 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 -1.9% today, which is smaller than the earnings decline of -3.1% last week. Positive earnings surprises reported by companies in the Financials and Information Technology sectors were mainly responsible for the decrease in the overall earnings decline during the week. If -1.9% 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. Five sectors are reporting (or are expected to report) year-over-year growth in earnings, led by the Financials sector. Six sectors are reporting a year-over-year decline in earnings, led by the Materials, Information Technology, and Energy sectors.

The blended revenue growth rate for the second quarter is 3.8% today, which is slightly above the revenue growth rate of 3.7% last week. Positive revenue surprises reported by companies in the Financials sector were mainly responsible for the small increase in the overall revenue growth rate during the week. If 3.8% 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 (or are projected to report) year-over-year growth in revenues, led by the Communication Services and Health Care sectors. Three sectors are reporting a year-over-year decline in revenues, led by the Materials sector.

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 17.0, which is above the five-year average and above the 10-year average.

During the upcoming week, 144 S&P 500 companies (including 10 Dow 30 components) are scheduled to report results for the second quarter.