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).
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.