Goldman Sachs analysts Amanda Sneider, CFA says in a new report that the firm forecasts S&P 500 (INDEXSP:.INX) will deliver a 1% positive surprise relative to consensus EPS estimates driven by lower sales but higher margins. Our top-down EPS forecast equals $26.30. If achieved, 1H would represent 48% of their full-year EPS estimate of $108. Consensus expects year/year EPS growth of 2% in 2Q 2013 led by Financials EPS growth of 20%. Ex-Financials and Utilities sales are expected to grow by 3% while trailing-four-quarter margins are forecast to contract by 11bp to 8.7% on recurring earnings. Further details from Goldman on S&P 500 2Q Earnings Preview below.

S&P 500 2Q Earnings Preview

S&P 500 2Q Earnings Preview: We expect another disappointing quarter for revenues

During the past year, weak foreign demand and FX exposure hurt sales results. Weak macro data in the first part of 2Q and dollar strengthening increase the likelihood of sales misses.

S&P 500 2Q Earnings Preview” Mid-2013 is an inflection point for both GDP and EPS growth

We expect year/year EPS growth will trough in either 2Q or 3Q. Consensus estimates EPS growth will bottom in 2Q at 2% before accelerating to 8% in 3Q and 14% in 4Q. Managements will address US GDP growth prospects and impact of higher bond yields in 2Q 2013 earnings conference calls.

S&P 500 2Q Earnings Preview: We forecast limited revisions to consensus 2H 2013 Earnings Per Share estimates

When adjusted for accounting differences, the bottom-up consensus full year 2013 EPS of $110 is in line with our full-year forecast of $108. Our full year 2013 sales forecast remains above consensus sales estimates implying upside to 2H 2013 forecasts.

S&P 500 Sales and Nominal GDP Growth Earnings Chart

2Q earnings preview: Shifting from stagnation to growth

Early signs of economic improvement in 2Q unsettled a market at new highs. In the first two months of 2Q, macroeconomic data disappointed but the S&P 500 (INDEXSP:.INX) rose 6% to reach a new peak. In late May, economic data surprises turned positive. Subsequent concerns over Fed tapering brought 10-year yields up to 2.6% while the S&P 500 fell 4%.

The bottom-up consensus estimate for 2Q 2013 is now $26.05, implying 2% growth versus 2Q 2012 on a recurring earnings base. Ex-Financials and Utilities sales are expected to grow by 3% while trailing-four-quarter margins are forecasted to contract by 11bp to 8.7% on recurring earnings.

Only Financials and Consumer Discretionary forecasts imply earnings growth relative to last year. Consensus expects strong earnings growth of 20% for Financials and 11% for Consumer Discretionary. Energy and Health Care forecasts indicate no change versus 2Q 2012. Estimates for all other sectors imply year-over-year EPS declines.

We expect another disappointing quarter for revenues but upside to full-year estimates. In three of the past four quarters, the percentage of firms exceeding sales estimates by one standard deviation or more was half of the 10-year average, while the percentage of firms missing sales estimates was 50-100% higher than average. Weak macro data in the first part of 2Q and dollar strengthening increases the likelihood of sales misses.

2Q earnings preview Margins, EPS, GDP

Margin estimates for 2Q are too low. Seasonally, 2Q margins are typically higher than any other quarter within the year, but 2Q 2013 margins are expected to be lower than any other quarter in 2013. Consensus forecasts margin contraction in every sector but Energy.

 2Q earnings preview forecast of 2013 EPS of $26.30, a 1% positive surprise to consensus. 1H 2013 earnings would represent 48% of our full-year 2013 forecast of $108.

Mid-2013 is an inflection point for both GDP and EPS growth. We expect year-over-year EPS growth will trough in either 2Q or 3Q. Consensus estimates suggest earnings growth will accelerate starting in 3Q. We expect managements will address US GDP growth prospects and higher bond yields in 2Q 2013 earnings conference calls. This will indicate whether the earnings inflection point will occur this quarter or next.

When adjusted for accounting differences, the bottom-up consensus full-year 2013 EPS of $110 is in line with our full-year forecast of $108. We expect limited revisions to 2H 2013 EPS estimates for the S&P 500 (INDEXSP:.INX) following 2Q results.

Consensus Bottom-up Estimates 2Q earnings preview

S&P 500 2Q Earnings Preview

Pressure on sales estimates from dollar strengthening

Over the past year, weak foreign demand and FX exposure harmed sales results. In three of the past four quarters, the percentage of firms exceeding revenue estimates by one standard deviation or more was half of the 10-year average, while the percentage of firms missing sales estimates was 50%-100% higher than average.

Revenue beats and misses are correlated to dollar strengthening. The percentage of misses in recent quarters was disproportionate to currency movements, indicating weaker demand also influenced sales results.

We expect another disappointing quarter for revenues. Weak macro data in the first part of 2Q and dollar strengthening increases the likelihood of sales misses. We expect the percentage of companies missing top-line estimates will be above the ten-year average of 20%, but less severe in magnitude than recent quarters.

Dollar Strengthening

Analysts lowered 2Q and 3Q sales estimates by 3% following revenue misses in 1Q 2013. Negative revisions to sales following disappointing 1Q 2013 results have reduced the potential impact to 2Q results. Unrelated to growth expectations, sales levels for 2Q-4Q 2013 increased following the addition of General Motors Company (NYSE:GM) to the S&P 500 (INDEXSP:.INX).

General Motors increased 2q 4q sales