While most S&P 500 companies will report earnings results for Q2 2019 over the next few weeks, about 5% of the companies in the index (24 companies) had reported earnings results for the second quarter through yesterday. Given the current expectations for a year-over-year decline in earnings for Q2 (and for Q3), have these companies discussed specific factors that had a negative impact on earnings or revenues in the second quarter (or are expected to have a negative impact in future quarters) during their earnings conference calls?
To answer this question, FactSet searched for specific terms related to several factors (i.e. “currency,” “China,” etc.) in the conference call transcripts of the 22 S&P 500 companies that had conducted second quarter earnings conference calls through yesterday (July 11) to see how many companies discussed these factors. FactSet then looked to see if the company cited a negative impact, expressed a negative sentiment (i.e. “volatility,” “uncertainty,” “pressure,” “headwind,” etc.), or discussed clear underperformance in relation to the factor for either the quarter just reported or in guidance for future quarters. FactSet also compared the number of companies citing these factors in the second quarter to the number of companies that cited these same factors in the first quarter through approximately the same point in time (through April 11). The results are shown below.
Foreign exchange has again been cited on the most earnings calls to date (12) as a factor that either had a negative impact on earnings or revenues in Q2 or is expected to have a negative impact on earnings and revenues in future quarters. More than half (55%) of the S&P 500 companies that have conducted earnings conference calls to date for the second quarter have cited some negative impact from foreign exchange rates. However, few of these companies discussed specific currencies that had weakened or were expected to weaken against the U.S. dollar. The number of companies citing a negative impact from FX in Q2 (12) is about equal to the number of companies that cited a negative impact from this factor in Q1 (13) at about the same point in time.
After foreign exchange, the factors with the highest number of companies citing a negative impact included tariffs and trade (8), wage and labor costs (7), weather (7), and raw material and other general inflation (7).
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.