S&P 500 quarterly earnings: Second quarter earnings outlook for sectors and stocks
Sam Subramanian PhD, MBA
Earnings reports are an important factor driving stock prices. The S&P 500 quarterly earnings parade starts in a few weeks. How is the 2nd quarter earnings outlook shaping up for different sectors and stocks?
The S&P 500 companies are set to report their second-quarter earnings in a few weeks.
During the first quarter, S&P 500 quarterly earnings grew 14.0% from the year-ago period. This exceeded analysts' 9.0% earnings growth forecast at the end of the quarter on March 31.
The first quarter earnings reporting season was strong.
So, how are expectations shaping for 2nd quarter earnings?
S&P 500 quarterly earnings: 2nd quarter outlook in aggregate
FactSet data show analysts expect S&P 500 company earnings to grow 6.5% in the second quarter.
As in prior quarters, analysts have trimmed growth forecasts since the start of the second quarter.
They have cut earnings growth forecasts by 2.2% from 8.7% they expected on March 31.
This reduction in expected earnings is lower than the 4.3% average for the past five years.
S&P 500 quarterly earnings: 2nd quarter outlook for sectors and stocks
Analysts expect year-over-year growth in second quarter earnings in nine of the 11 sectors. Energy, information technology, and financial sectors are forecasted to lead the way.
Analysts expect earnings to shrink in consumer discretionary and utility sectors.
S&P 500 quarterly earnings are forecasted to rise 6.5% in the second quarter with energy sector earnings contributing the most to growth.
Analysts expect the energy sector's earnings to grow an abnormally high 401.3%. This is due to the low profits recorded in the 2nd quarter of 2016.
Low oil prices limited aggregate profits in the energy sector to just $1.9 billion in the 2nd quarter of 2016. Energy company profits are forecasted to increase to $9.6 billion in this year's second quarter.
Analysts expect sector heavyweights ExxonMobil (XOM), Chevron (CVX), and ConocoPhillips (COP) to record triple digit growth in second quarter earnings.
The information technology sector is expected to contribute to S&P 500 company earnings growth. Here, semiconductor companies are forecasted to increase their EPS at a rapid rate.
Micron Technology (MU) is forecasted to earn $1.50 a share, reversing last year's loss of 8 cents a share. Analysts expect NVIDIA (NVDA) and Applied Materials (AMAT) to grow their second quarter EPS over 70% from the year-ago period.
Analysts have raised their earnings estimates in the financial sector after the Federal Reserve hiked benchmark interest rates in March and June this year. Insurers are forecasted to lead growth here. American International Group (AIG), Prudential Financial (PRU), and Allstate (ALL) are all expected to grow EPS by over 20%.
Risk to S&P 500 quarterly earnings
The energy sector accounts for nearly 45% of the growth expected in S&P 500 quarterly earnings in the second quarter. In other words, the S&P 500's expected earnings growth rate would drop to 3.6% from 6.5%, if the energy sector is excluded.
Likewise, the energy sector is expected to contribute nearly 30% of the growth expected in S&P 500 quarterly earnings for all of 2017.
The energy sector's earnings depend on the price of oil. They change by nearly $1 billion for every $1 change in the price of oil.
This relatively large dependence of S&P 500 quarterly earnings growth on the energy sector's earnings and the price of oil poses some risk.
The price of oil has averaged higher in the second quarter of 2017 compared to its average in the second quarter of 2016. However, oil prices have off-late fallen more than 10% below the current quarter's average due to oversupply.
Meanwhile, analysts are optimistic on the energy sector's earnings in the second half of 2017. They expect oil prices in the second half of 2017 to exceed the second quarter's average and help the energy sector's earnings to exceed its second quarter tally.
If the price of oil, however, does not rebound relatively soon, analysts would be forced to reduce their energy sector earnings forecasts. This would effectively lower S&P 500 quarterly earnings growth expectations for the second half of 2017.
AlphaProfit's Investment Selection Process
You need a time-tested, proven investing strategy to protect and grow your money in this challenging market.
To increase the odds of selecting winning sector ETFs & selecting winning Fidelity Select Funds, AlphaProfit evaluates sectors on valuation, momentum, and news quality with EPS growth being one of the news quality metrics.
This multi-factor analysis ensures investments in the chosen sector are attractively priced and have the catalysts needed to sustain growth in future.
Fully 75% of investments selected by AlphaProfit have made money ... and this includes results during the 2008 financial crisis and the dot-com bust at the turn of the millennium.
The high percentage of winning investment selections translates into lower risk and higher return for AlphaProfit Premium Service investment newsletter subscribers.
AlphaProfit's Free Investment Newsletter MoneyMatters
Compounding at an annual rate of 18.8%, a dollar invested in AlphaProfit's selection process in 1994 is now worth $55.61 while a comparable investment in the S&P 500 is worth just $7.99.
Consistent selection of winning mutual fund picks has enabled AlphaProfit's Premium Service to rank #1 in Hulbert Financial's investment newsletter rankings multiple times.
Sign up for AlphaProfit's FREE investment newsletter MoneyMatters and get two special reports:
Five Smart Ways of Using Fidelity Select Funds and Avoid Three Common Mistakes ETF Investors Make.
Sector ETFs: Invest in the Best Sector ETF Consistently
Fidelity Select Funds: Choose the Best Fidelity Sector Fund Consistently
AlphaProfit Free and Premium Investment Newsletters
Protect & grow your wealth with
investment recommendations from free e-letter
By Hulbert #1 rank winner Dr. Sam Subramanian
'Incisive Insights, Impressive Results' - Jim Woodruff
About AlphaProfit MoneyMatters and AlphaProfit
AlphaProfit MoneyMatters is a free e-letter distributed to registered users of AlphaProfit's website. The e-letter analyzes the economy, markets, and sectors and provides money-making insights on stocks, exchange-traded funds, and mutual funds.
AlphaProfit MoneyMatters is edited by Dr. Sam Subramanian acclaimed for his financial acumen and analytical skills.
AlphaProfit Investments, LLC is an independent investment research firm based in Sugar Land, TX. AlphaProfit publishes the AlphaProfit Sector
Investor's Newsletter, edited by Dr. Sam Subramanian. Leveraging sector funds, the Newsletter provides high-performance model portfolios
with Fidelity funds and exchange-traded funds.
It also includes actionable stock recommendations. This newsletter features among MarketWatch's top 10 investment newsletters and has won
the coveted #1 rank from Hulbert Financial
Copyright Policy and Fair Use Guide
You are welcome to quote a short excerpt of the article not exceeding 100 words with attribution in the form of a hyperlink to the article's
full URL or http://www.alphaprofit.com. If you wish to republish the article in full on
your website, blog, or other media, you must obtain permission.
AlphaProfit MoneyMatters™ is for information purposes only. Nothing herein should be construed as an offer to buy or sell securities or to give individual advice on investing. Factual material is obtained from sources believed
to be reliable and is provided without warranties of any kind. AlphaProfit Investments, LLC is not responsible for any errors or omissions. AlphaProfit Investments, LLC neither is associated with nor receives any compensation from any
of the investment companies, brokers or entities connected with the securities mentioned herein. Please review our Terms and Conditions of Use and Subscriber Agreement which is available on our website at
www.alphaprofit.com; they govern your relationship with AlphaProfit Investments, LLC, including, but not by way of limitation, use of the AlphaProfit MoneyMatters.
This page is best viewed in 1024 by 768 pixels screen resolution or higher.
Copyright © 2017 AlphaProfit Investments, LLC. All rights reserved.