The following is an excerpt from this week’s Earnings Trends article. To see the full article, please click here.
With only a few earnings reports still to come, the Q1 earnings season is essentially over. The focus will shift in the coming days to the 2015 Q2 earnings season, as companies with fiscal quarters ending in May start coming out with results. We count these companies, which includes such major players like Adobe (ADBE – Analyst Report), Nike (NKE – Analyst Report) and FedEx (FDX – Analyst Report), as part of our Q2 tally. By the time Alcoa (AA – Analyst Report) reports on July 8th, we will have seen Q2 results from about two dozen S&P members that have fiscal quarters ending in May.
Estimates for the current period have come down quite a bit since the quarter got underway. This decrease is in-line with the trend that we have been seeing quarter after quarter for more than two years now. The chart below shows what has happened to 2015 Q2 earnings estimates for S&P 500 companies since the start of the year.
As was the case in Q1, the Energy sector remains the biggest drag on Q2 estimates. Total Energy sector earnings are expected to be down -65.1% from the same period last year on -40.6% lower revenues. If we exclude the Energy sector from Q2 estimates, total earnings for the S&P 500 index would be barely in the positive territory (up +0.3%). The growth picture isn’t expected to improve in any meaningful way in the coming quarters either, as the chart below shows.
Q1 Scorecard (as of June 4th, 2015)
Total earnings for the 498 S&P 500 members that have reported results already are up +2.4% on -3.3% revenues, with 62.0% beating EPS estimates and only 42.4% coming ahead of top-line expectations.
As we have stated repeatedly in this space since the start of the Q1 reporting cycle, this is weak performance compared to what we have seen from the same group of 498 S&P 500 members in other recent periods. (Please note that we provide the scorecard for the Russell 2000 index on page 16 of the detailed report).
The two side-by-side charts below give a historical context to the results thus far – by comparing the Q1 earnings & revenue growth rates (left-hand side chart) and earnings & revenue beat ratios (right-hand side chart) with what these same companies achieved in the preceding quarter as well as the 4-quarter average.
