S&P 500 Earnings Season Update: July 24, 2020

To date, 26% 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 (81%) is above the five-year average. In aggregate, companies are reporting earnings that are 11.4% above the estimates, which is also above the five-year average. In terms of sales, the percentage of companies reporting actual sales above estimates (71%) is above the five-year average. In aggregate, companies are reporting sales that are 3.0% 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 -42.4%, which is smaller than the earnings decline of -44.1% last week. Positive earnings surprises reported by companies in the Health Care and Information Technology sectors were mainly responsible for the decrease in the overall earnings decline during the week. If -42.4% 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. One sector (Utilities) is reporting year-over-year earnings growth. The other 10 sectors are reporting 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 -10.1%, which is smaller than the revenue decline of -10.4% last week. Positive revenue surprises reported by companies in the Information Technology and Health Care sectors were mainly responsible for the decrease in the overall revenue decline during the week. If -10.1% 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%). Three sectors are reporting year-over-year growth in revenues, led by the Health Care sector. Eight sectors are reporting 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 (-24.0%) and the fourth quarter (-12.3%) of 2020. However, they also project a return to earnings growth in Q1 2021 (12.7%).

The forward 12-month P/E ratio is 22.2, which is above the five-year average and above the 10-year average.

During the upcoming week, 192 S&P 500 companies (including 12 Dow 30 components) are scheduled to report results for the second quarter.