S&P 500 Reporting A Lower Year-Over-Year Net Profit Margin For the 6th Straight Quarter

Given declining year-over-year inflation, what is the S&P 500 reporting for a net profit margin for the second quarter?

The (blended) net profit margin for the S&P 500 for Q2 2023 is 11.1%, which is below the previous quarter’s net profit margin (11.5%), below the year-ago net profit margin (12.2%), and below the 5-year average (11.4%). If 11.1% is the actual net profit margin for the quarter, it will mark the sixth straight quarter in which the net profit margin for the index has declined year-over-year.

At the sector level, four sectors are reporting a year-over-year increase in their net profit margins in Q2 2023 compared to Q2 2022, led by the Real Estate (36.9% vs, 35.3%), Consumer Discretionary (7.3% vs. 6.0%), and Communication Services (11.5% vs. 10.4%) sectors. On the other hand, seven sectors are reporting a year-over-year decrease in their net profit margins in Q2 2023 compared to Q2 2022, led by the Energy (9.9% vs. 14.4%), Materials (10.8% vs. 14.5%), and Health Care (7.6% vs. 11.0%) sectors.

Four sectors are reporting net profit margins in Q2 2023 that are above their 5-year averages, led by the Industrials (10.7% vs. 8.2%) sector. On the other hand, five sectors are reporting net profit margins in Q2 2023 that are below their 5-year averages, led by the Health Care (7.6% vs. 10.4%) sector.

Five sectors are reporting a quarter-over-quarter increase in their net profit margins in Q2 2023 compared to Q1 2023, led by the Industrials (10.7% vs. 9.3%) sector. On the other hand, five sectors are reporting a quarter-over-quarter decrease in their net profit margins in Q2 2023 compared to Q1 2023, led by the Energy (9.9% vs. 12.4%) and Health Care (7.6% vs. 9.3%) sectors.

It is interesting to note that analysts believe net profit margins for the S&P 500 will be higher going forward. As of today, the estimated net profit margins for Q3 2023 and Q4 2023 are 11.7% and 11.7%, respectively.

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