The second-quarter earnings season is in full swing with 50.5% of the total S&P 500 index members having released their results through Jul 27. Following the trend set in other recent quarters, growth continues to remain elusive. The second quarter is expected to be the fifth in a row to suffer an earnings decline for the benchmark index. Having said that, results this quarter are turning out to be less grievous than the ones that went before.
Per the latest Earnings Preview report, 208 S&P 500 companies have reported their second-quarter earnings so far with 73.1% topping bottom-line estimates and 51.9% coming ahead of top-line expectations. The overall report suggests that earnings results have moved south 4.7% despite a nominal 0.4% increase in revenues from the same period last year.
On the whole, earnings for S&P 500 companies are projected to decline 3.5% from the year-ago period, on 0.4% lower revenues.
Ten out of 16 Zacks sectors are expected to see growth in negative territory in Q2, with Energy, Basic Materials and Transportation suffering double-digit declines. However, Autos, Construction, Conglomerates, Utilities, Medical and Business Services – six in all – are projected to land up on the brighter side, booking growth this season.
The Business Services sector is looking reasonably good. For the sector, earnings are expected to grow 3.1%, while sales are touted to rise 6.6% over last year. The projected improvement is largely due to a recovery in oil prices and the faded effects of the dollar strength.
On that note let’s look into a couple of outsourcing stocks that are expected to release their results on Aug 1.
TriNet Group, Inc. (TNET - Free Report) is a company belonging to the Outsourcing industry. It provides its services to small and medium-sized businesses across the U.S. and Canada. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for it to beat estimates. TriNet has an Earnings ESP of 0.00% and carries a Zacks Rank 3 (Hold). Over the four trailing quarters, the company has beaten estimates twice, still recording a negative average surprise of 13.42%.
Sykes Enterprises, Incorporated (SYKE - Free Report) , an Outsourcing industry company, has its operations spread across the U.S., Canada, Latin America, Australia, the Asia Pacific Rim, Europe, the Middle East, and Africa. Sykes too has an Earnings ESP of 0.00% and carries a Zacks Rank #3 (Hold). Over the last four quarters, the company has beaten estimates on every occasion, with an average beat of 30.39%.
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