As third quarter earnings release period comes to an end, 84% of the S&P 500 (INDEXSP:.INX) have reported earnings and we can certainly draw some positives and negatives.  On one hand, S&P 500, overall, saw earnings per share rise 2% higher than estimates, but sales contracted 0.5%.  However, on a year over year basis, S&P 500 earnings per share grew 10% and sales rose 4%.  Margin levels continue to hover around 9.3%, but analyst estimates imply further gains, up to 9.9% in 2015 as estimated by Goldman Sachs Group Inc (NYSE:GS).

S&P 500 3Q Earnings

S&P 500: Energy sector’s EPS to grow, sales to fall

However, looking at revisions to 2015 full year estimates, we notice a drop in expectations.  Upon further investigation, analysts continue to post negative revisions to the energy sector, which has been weighing on S&P 500 earnings estimates.  As a sector, energy is forecasted to see earnings per share fall 11.1% next year, sales to fall 4.8% and margins to fall 55 basis points, the largest and most negative revision of all sectors in the S&P 500.  The negative sentiment towards the energy sector comes as oil prices continue to see steep declines.  December WTI crude oil is currently priced at $77.77 as of this writing, and gasoline prices continue to fall and hit a new multiyear low last night, at $2.0484.

3Q Earnings S&P 500

On a more brighter look at 3Q earnings, the highest earnings per share growth from 3Q 2013 was the telecom services sector, which saw earnings per share rise 23% from last year and sales growth of 2%.  Consumer staples saw earnings per share stay flat from a year ago and represents the worst earnings per share growth of the S&P 500.   In sales, health care saw the largest sales growth from Q3 2013, up 12%.  Weakest sales growth came out of the materials sector, where sales fell -4%.

3Q Earnings S&P 500

S&P 500 4Q EPS to reach $30.53

Overall, looking forward, analysts at Goldman Sachs are predicting continued earnings per share growth for the S&P 500 ex-energy.  Fourth quarter 2014 earnings per share for the S&P 500 are forecasted to reach $30.53 and margins look to continue their uptrend into next year.  Energy’s woes look to continue as fundamental headwinds continue to mount and commodity prices continue to fall.  In the last week alone, the energy sector saw a 3% negative revision to 2015 earnings per share and further revisions are estimated to push earnings estimates lower.  Overall, in the 3Q 2014 earnings releases, 23% of reported companies reported positive earnings surprise and positive revenue surprise, while only 3% have reported negative earnings surprise and negative revenue surprise.  Overall, there are some strong elements to the 3Q earnings season, but there are also some hurdles that have become more apparent as well, such as the energy sector.  However, 10% earnings growth year over year is certainly something to be positive about.

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