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The blended (combines actual results for companies that have reported and estimated results for companies yet to report) earnings growth rate for the S&P 500 for the second quarter is 10.1% as of Friday. This growth rate is above the estimated earnings growth rate of 6.4% at the end of the quarter (June 30) and above the estimated earnings growth rate of 8.6% at the start of the quarter (March 31).

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If 10.1% is the actual growth rate for the second quarter, it will mark the second highest (year-over-year) earnings growth for the index since Q4'11 (11.6%), and it will mark the first time the index has seen two consecutive quarters of (year-over-year) double-digit earnings growth since Q3'11 (16.7%) and Q4'11 (11.6%).

As we've described in previous reports, it is not surprising that the index is now reporting double-digit earnings growth for the second quarter. 

Q2 Earnings Drivers

What is driving the increase in the earnings growth rate since June 30? As of Friday, more S&P companies are beating EPS estimates (72%) for Q2 2017 relative to the five-year average (68%). Companies in aggregate are beating EPS estimates by a wider margin for Q2 2017 (+6.3%) relative to the five-year average (+4.2%)   

Because of the number and magnitude of these upside earnings surprises reported by S&P 500 companies for Q2, aggregate earnings for the index have increased by $9.7 billion since June 30 (as higher actual earnings replaced estimated earnings in the growth rate calculation). Three sectors account for $7.2 billion (or 74%) of this $9.7 billion increase in earnings since June 30: Health Care, Financials, and Information Technology.

In these three sectors, the upside earnings surprises reported by Microsoft ($0.98 vs. $0.71), JPMorgan Chase ($1.82 vs. $1.59), Gilead Sciences ($2.56 vs. $2.16), Facebook ($1.32 vs. $1.12), Apple ($1.67 vs. $1.57), Merck ($1.01 vs. $0.87), and Aetna ($3.42 vs. $2.47) were all substantial contributors to the increase in earnings growth for the index during this time.

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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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