The Q2 earnings season will get into the spotlight following Alcoa’s (AA Quick QuoteAA - Free Report) July 11^th report. But the earnings season has actually gotten underway already, with results from 21S&P 500 members already out. All of these early reporters, which includes major operators like FedEx (FDX Quick QuoteFDX - Free Report) , Oracle (ORCL Quick QuoteORCL - Free Report) and Adobe (ADBE Quick QuoteADBE - Free Report) , have fiscal quarters ending in May, but get clubbed as part of the June quarter tally. We have another 2 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 comes out with its results.

The chart below shows the weekly calendar of earnings releases for the entire Q2 earnings cycle. As you can see, we are about two weeks away from the reporting cycle really ramping up. Keep in mind that the week of July 11^th that gets underway with Alcoa’s report will also have reports from all the major banks.

Expectations for the Quarter

Total earnings for the 21 index members that have reported results are down -4.1% on +0.9% 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 -6.2% on -0.7% lower revenues, with growth in negative territory for 9 of the 16 Zacks sectors. This will be the 5^th quarter in a row of negative earnings growth for the S&P 500 index.

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 -2.8%.

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.

Standout Sectors

While Energy stands out for its very tough comparisons, there is not much positive growth coming from the other major sectors either. The Finance and Technology sectors, the two biggest earnings contributors in the S&P 500 index, are also expected to see earnings decline in Q2 from the year-earlier levels.

For the Finance sector, total Q2 earnings are expected to be down -5.8% on -0.3% lower revenues, which will follow -6.9% decline in the sector’s earnings in the preceding quarter. It has been a tough period for the sector, with benchmark treasury yields going down the summary 2012 record lows on the back of the Brexit surprise and Fed expectations. This low interest rate environment is a big restraint on the group’s earnings power through continued pressures on net interest margins. The recent completion of the Fed stress tests has improved the outlook for share buybacks and dividend increases across the major banks space, but the group’s earnings outlook continues to remain under pressure.

The Technology sector, total earnings are expected to be down -6.4% on +2.2% higher revenues, which would follow the sector’s -4.5% earnings decline on +0.4% higher revenues in Q1. The big culprit for the Tech sector’s weak showing this quarter (as well

as last one) is Apple (AAPL Quick QuoteAAPL - Free Report) , whose June quarter earnings are expected to be down -28.4% on -15.2% lower revenues from the same period last year. Excluding Apple, the Tech sector’s Q2 earnings would be down only -0.9% (Apple alone brings in roughly a fifth of the Tech sector’s total earnings).

On the positive side, Q2 earnings are expected be up at Autos (up +8.5%), Construction (+8.9%), Conglomerates (+12%), and Utilities (+20%). The Utilities and Conglomerate sectors’ strong growth numbers are solely due to easy comparisons at AES Corp (AES Quick QuoteAES - Free Report) and General Electric (GE Quick QuoteGE - Free Report) , respectively.  

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Note: For a complete analysis of 2016 Q2 estimates, please check out weekly Earnings Trends report.

Here is a list of the 10 companies reporting this week, including 2 S&P 500 members.