As of today, the estimated earnings decline for the second quarter for the S&P 500 stands at -2.6%. If -2.6% is the actual earnings decline for the quarter, it will mark the first time the index has reported two straight quarters of year-over-year declines in earnings since Q1 2016 and Q2 2016. It will also mark the largest year-over-year decline in earnings since Q2 2016 (-3.2%).
Looking at the third quarter (Q3 2019), what are analyst expectations for year-over-year earnings? Do analysts believe earnings will decline in the third quarter of 2019 as well?
The answer is yes.
Over the past two weeks, the aggregate earnings growth rate for Q3 2019 changed from slight year-over-year earnings growth on June 7 (+0.2%) to a slight year-over-year earnings decline today (-0.3%).
However, expectations for earnings growth for Q3 2019 have been falling over the past few months. On December 31, the estimated earnings growth rate for Q3 2019 was 3.4%. By March 31, the estimated earnings growth rate had fallen to 1.2%. Today, the earnings decline stands at -0.3%.
It is interesting to note that only two of the eleven sectors are projected to report a year-over-year decrease in earnings for the third quarter: Energy (-13%) and Information Technology (-9%). These two sectors rank first (Information Technology) and fourth (Energy) in terms of sectors with the highest international revenue exposure.
If the index reports a year-over-year decline in earnings in both the second quarter and the third quarter, it will mark the first time the index will have reported three consecutive quarters of year-over-year earnings declines since Q4 2015 through Q2 2016. Analysts in aggregate currently expect earnings growth to return in the fourth quarter (6.7%) and double-digit earnings growth to return in Q1 2020 (10.3%).
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.