S&P 500 Earnings Season Update: August 7, 2020

To date, 89% of the companies in the S&P 500 have reported actual results for Q2 2020. In terms of earnings, the percentage of companies reporting actual EPS above estimates (83%) is above the five-year average. If 83% is the final percentage for the quarter, it will mark the highest percentage of S&P 500 companies reporting a positive EPS surprise since FactSet began tracking this metric in 2008. In aggregate, companies are reporting earnings that are 22.4% above the estimates, which is also above the five-year average. If 22.4% is the final percentage for the quarter, it will mark the largest earnings surprise percentage reported by the index since FactSet began tracking this metric in 2008. In terms of sales, the percentage of companies reporting actual sales above estimates (64%) is above the five-year average. In aggregate, companies are reporting sales that are 1.6% 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 -33.8%, which is smaller than the earnings decline of -35.7% last week. Positive earnings surprises reported by companies in multiple sectors (led by the Health Care and Communication Services sectors) were responsible for the decrease in the overall earnings decline during the week. If -33.8% is the actual decline for the quarter, it will mark the largest year-over-year decline in earnings reported by the index since Q1 2009 (-35.4%). It will also mark the fifth time in the past six quarters in which the index has reported a year-over-year decline in earnings. Three sectors are reporting year-over-year growth in earnings led by the Utilities and Health Care sectors. Eight sectors are reporting a year-over-year decline in earnings led by the Energy, Industrials, Consumer Discretionary, and Financials sectors.

The blended revenue decline for the second quarter is -9.8%, which is slightly larger than the revenue decline of -9.7% last week. Negative revenue surprises reported by companies in the Energy sector were mainly responsible for the slight increase in the overall revenue decline during the week. If -9.8% is the actual decline for the quarter, it will mark the largest year-over-year decline in revenue reported by the index since Q3 2009 (-11.5%). Two sectors are reporting year-over-year growth in revenues: Information Technology and Health Care. Nine sectors are reporting a year-over-year decline in revenues led by the Energy and Industrials sectors.

Looking ahead, analysts predict a (year-over-year) decline in earnings in the third quarter (-22.9%) and the fourth quarter (-12.8%) of 2020. However, they also project a return to earnings growth in Q1 2021 (12.9%).

The forward 12-month P/E ratio is 22.3, which is above the five-year average and above the 10-year average.

During the upcoming week, 11 S&P 500 companies (including one Dow 30 component) are scheduled to report results for the second quarter.

*Author's Note: The FactSet Earnings Insight report will not be published on August 14 or August 21.  The next edition of the report will be published on August 28.