S&P 500 Now Projected to Report a Year-over-Year Decline in Earnings in Q4 2019

As of November 1, the blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings decline for the third quarter for the S&P 500 stood at -2.7%. If -2.7% is the actual earnings decline for the quarter, it will mark the first time the index has reported three straight quarters of year-over-year declines in earnings since Q4 2015 through Q2 2016. It will also mark the largest year-over-year decline in earnings since Q2 2016 (-3.2%).

Looking at the fourth quarter (Q4 2019), what are analyst expectations for year-over-year earnings? Do analysts believe earnings will decline in the fourth quarter of 2019 as well?

The answer is yes.

Over the past week, the aggregate earnings growth rate for Q3 2019 changed from slight year-over-year earnings growth on October 25 (+0.3%) to a slight year-over-year earnings decline as of November 1 (-0.4%).

However, expectations for earnings growth for Q4 2019 have been falling over the past few months. On June 30, the estimated earnings growth rate for Q4 2019 was 5.6%. By September 30, the estimated earnings growth rate had fallen to 2.4%. As of November 1, the earnings decline stood at -0.4%.

Five of the 11 sectors are now projected to report a year-over-year decrease in earnings for the fourth quarter, led by the Energy (-29.7%) and Consumer Discretionary (-10.3%) sectors.

If the index reports a year-over-year decline in earnings in both the third quarter and the fourth quarter, it will mark the first time the index will have reported four consecutive quarters of year-over-year earnings declines since Q3 2015 through Q2 2016. Analysts currently expect earnings growth to return in the first quarter of 2020 (5.6%).