S&P 500 Now Projected to Report a Y/Y Decline in Earnings in Q2 2020

The estimated earnings decline for the S&P 500 for the first quarter is -2.9%. If -2.9% is the actual decline for the quarter, it will mark the largest year-over-year decline in earnings for the index since Q2 2016 (-3.2%). It will also mark the fourth time in the past five quarters in which the index has reported a year-over-year decline in earnings. Looking at the second quarter (Q2 2020), what are analyst expectations for year-over-year earnings? Do analysts believe the earnings declines will continue in the second quarter of 2020 as well?

The answer is yes.

Last week, the aggregate earnings growth rate for Q2 2020 changed from slight year-over-year earnings growth on March 12 (+0.8%) to a slight year-over-year earnings decline on March 13 (-0.7%).

However, expectations for earnings growth for Q2 2020 have been falling over the past few months. On September 30, the estimated earnings growth rate for Q2 2020 was 8.0%. By December 31, the estimated earnings growth rate had fallen to 5.7%. Today, the estimated earnings decline is -3.9%.

Four of the 11 sectors are now projected to report a year-over-year decrease in earnings for the second quarter: Energy (-68.4%), Consumer Discretionary (-14.4%), Industrials (-9.9%), and Financials (-7.4%).

If the index reports a year-over-year decline in earnings of -3.9% in the second quarter, it will mark the largest year-over-year decline in earnings for the index since Q1 2016 (-6.9%). It will also mark fifth time in the past six quarters in which the index has reported a year-over-year decline in earnings. Analysts in aggregate currently expect earnings growth to return in Q3 2020 (3.0%) and double-digit earnings growth to return in Q1 2021 (14.1%).