Earnings Are Set to Fall. Again.

Earnings season is about two-thirds over and it looks to be another one for falling earnings. Earnings for the energy sector are expected to fall by 87%. Even without energy, earnings for the S&P 500 are expected to rise by 1.8%.

With just over two-thirds of S&P 500 companies reporting results, adjusted earnings—which exclude various items deemed unusual—are expected to fall for the fourth straight quarter, down 2.6% from the same period last year, according to Thomson Reuters. Revenues are also forecast to slip 0.4%, the sixth straight quarterly decline.

The pain is broad-based: Only the consumer-discretionary, health-care and utilities sectors are expected to see profits grow by more than 5%. Quarterly earnings are forecast to decline by 87% for energy companies, 3.6% for financial firms and 1.4% for telecommunications companies, according to Thomson Reuters.

Energy companies have been suffering for more than a year, with oil prices collapsing from around $115 a barrel in mid-2014 to a low of $27 in January. But profit declines are slowing as prices have somewhat rebounded to around $40 a barrel, and many analysts expect results to keep improving in the third and fourth quarters.

Excluding the hard-hit energy sector, second-quarter earnings are expected to rise by a still-slow 1.8%, while revenues are likely to increase about 2.6%, Thomson Reuters said.

Analysts polled by Thomson Reuters now forecast that the third quarter will barely show profit growth, predicting an average increase of 0.3% for companies in the S&P 500 compared with expectations of 2% growth a month ago. Earnings forecasts often become less optimistic as a quarter progresses.

Posted by on August 3rd, 2016 at 10:29 am


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