S&P 500 Earnings Season Update: July 17, 2020

To date, 9% 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 (73%) is above the five-year average. In aggregate, companies are reporting earnings that are 6.3% above the estimates, which is also above the five-year average. In terms of sales, the percentage of companies (78%) reporting actual sales above estimates is above the five-year average. In aggregate, companies are reporting sales that are 3.5% 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 -44.0%, which is smaller than the earnings decline of -44.7% last week. Positive earnings surprises reported by companies in the Health Care sector were mainly responsible for the decrease in the overall earnings decline during the week. If -44.0% is the actual decline for the quarter, it will mark the largest year-over-year decline in earnings reported by the index since Q4 2008 (-69.1%). 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. All 11 sectors are reporting (or are predicted to report) a year-over-year decline in earnings, led by the Energy, Consumer Discretionary, Industrials, and Financials sectors.

The blended revenue decline for the second quarter is -10.5%, which is smaller than the revenue decline of -10.8% last week. Positive revenue surprises reported by companies in the Financials sector were mainly responsible for the decrease in the overall revenue decline during the week. If -10.5% 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%). One sector (Health Care) is reporting year-over-year growth in revenues. One sector (Utilities) is expected to report flat (0.0%) year-over-year revenues. The other nine sectors are reporting (or are predicted to report) a year-over-year decline in revenues, led by the Energy, Industrials, and Consumer Discretionary sectors.

Looking ahead, analysts predict a (year-over-year) decline in earnings in the third quarter (-24.4%) and the fourth quarter (-12.4%) of 2020. However, they also project a return to earnings growth in Q1 2021 (12.1%).

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, 92 S&P 500 companies (including eight Dow 30 components) are scheduled to report results for the second quarter.