No one is expected to pay attention to earnings given the unexpected Brexit vote, but the Q2 earnings season has gotten underway, with results from 10 S&P 500 members already out. All of these early reporters, which includes major operators like
FedEx ( FDX), Oracle ( ORCL) and Adobe ( ADBE Quick Quote ADBE - Free Report) , have fiscal quarters ending in May, but get clubbed as part of the June quarter tally. We have another 11 index members with fiscal quarters ending in May on deck to report results this week. All in all, we will have seen Q2 results from almost two dozen S&P 500 members by the time Alcoa ( AA) comes out with its results on July 11 th.
The chart below shows the weekly calendar of earnings releases for the entire Q2 earnings cycle. As you can see, we are about three weeks away from the reporting cycle really ramping up.
Expectations for the Quarter
Total earnings for the 10 index members that have reported results are up +4.1% on +4.2% higher revenues, with 60% beating EPS estimates and equal proportion coming ahead of top-line expectations. Comparison of the Q2 results thus far with prior periods offers a mixed picture. But it’s likely too small a sample to draw any conclusions from in any case.
For Q2 as a whole, total earnings for the S&P 500 are expected to be down -6.1% on -0.7% lower revenues, with growth in negative territory for 9 of the 16 Zacks sectors. As has been the pattern in other recent periods, the Energy sector remains the biggest drag on the aggregate growth picture, with total earnings for the sector expected to be down -78.9% on -27.1% lower revenues. Excluding the Energy sector, earnings for the rest of the index would be down -2.7%.
The table below shows the summary picture for Q2 contrasted with what was actually achieved in the preceding period.
Estimates for Q2 faithfully followed the well-trodden path of previous quarters, as the chart below shows.
As negative as this revisions trend looks, it is nevertheless an improvement over what we had seen in the comparable period(s) in other recent quarters. The improved commodity-price backdrop and the reduced dollar drag are some of the explanations for this development. It will be interesting to see if this trend of decelerated negative revisions will continue this earnings season. But we will have to wait a few more weeks to get a better read on this development after companies start reporting June quarter results and guide towards Q3 estimates. Current estimates for Q3 are showing flat growth from the year-earlier level.
Expectations Beyond Q2
The chart below shows current quarterly earnings growth expectations for the index in 2016 Q2 and the following four quarters contrasted with actual declines in the preceding three quarters. As you can see, growth is expected to be negative in 2016 Q2 and flat in the following quarter.
The only meaningful positive earnings growth this year is expected to come from the last quarter of the year, which is then expected to continue into 2017 when earnings for the S&P 500 index are expected to be up in double-digits. We will see if those estimates will hold up as we reach the last quarter of the year. But given what we have seen over the last few quarters, the odds don’t look that favorable.
Note: Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published. Note: For a complete analysis of 2016 Q2 estimates, please check out weekly Earnings Trends report. . Here is a list of the 32 companies reporting this week, including 11 S&P 500 members
Company Ticker Q0 EST Year Ago Last EPS Surprise Report Date Time
CARNIVAL CORP CCL 0.39 0.25 25.81% Tuesday BTO
BARNES NOB EDUC
NIKE INC-B NKE 0.48 0.49 14.58% Tuesday AMC
GENL MILLS GIS 0.6 0.75 4.84% Wednesday BTO MONSANTO CO-NEW MON 2.41 2.39 -1.22% Wednesday BTO ACUITY BRANDS AYI 1.97 1.37 13.33% Wednesday BTO
PIER 1 IMPORTS
INVESTORS RL ES
XPLORE TECH CP
PAYCHEX INC PAYX 0.49 0.44 0.00% Thursday BTO DARDEN RESTRNT DRI 1.08 1.08 0.83% Thursday BTO CONAGRA FOODS CAG 0.52 0.59 17.24% Thursday BTO MCCORMICK & CO MKC 0.74 0.75 7.25% Thursday BTO CONSTELLATN BRD STZ 1.51 1.26 4.39% Thursday BTO
MICRON TECH MU -0.1 0.54 44.44% Thursday N/A