How things change (or not)! A June 19th report from FactSet Insight highlights the cyclicity of financial markets and indirectly suggests that analysts are expecting a big bounce back in crude oil prices over the next few quarters.

FactSet Senior Earnings Analyst John Butters points out that the energy sector is projected to be the largest contributor to the earnings decline for the index for the quarter, as consensus estimates for the sector are for a year-over-year decrease in earnings of 60.5%. Notably, if the energy sector is excluded from the index, the S&P 500 would be projected to report  earnings growth of 2% in the second quarter.

That said, with a low base to start from, the energy sector is also projected to be a big contributor to earnings growth next year. Year-over-year earnings for the S&P 500 for the first quarter are estimated to move up by around 8.4%. The energy sector should be a major contributor to index earnings growth for the quarter, as the energy sector is anticipated to report a 16% year-over-year boost in earnings.

Energy sector a drag on S&P 500 earnings in 2015

According to FactSet estimate data, year-over-year earnings for the S&P 500 are expected to slip by 0.9% in the third quarter. Note that the energy sector is projected as the largest contributor to the earnings decline for the quarter, as energy firms are looking at a 58.5% year-over-year decrease in earnings. If the energy sector is excluded, the S&P 500 would be looking at earnings growth of 6.4%.

Year-over-year earnings for the S&P 500 estimated to increase by 4.7% in the fourth quarter. The energy sector will again be the biggest drag on earnings growth , as energy is projected to report a 38.7% year-over-year decline in earnings. Excluding the energy sector, the estimated earnings growth rate for the S&P 500 would move up to 8.4%.

Energy sector to boost S&P 500 earnings in 2015

Energy-sector Energy sector

2016 is, however an entirely different story. Year-over-year earnings for the S&P 500 are anticipated to move up by 8.4% in the first quarter of of 2016. The energy sector will become a positive contributor to earnings growth, as energy is anticipated to report a year-over-year increase in earnings of 16.0%. Excluding the energy sector, the estimated earnings growth rate for the index would drop to 8.0%

The S&P 500 is looking at earnings growth of 12.1% according to FactSet estimate data. The energy sector will bounce back from 2015 to become the greatest contributor to earnings growth for the S&P 500 for the year. Energy should report year-over-year growth of 34.4%, the largest estimated earnings growth rate of all ten sectors in the index. Excluding the energy sector, the estimated earnings growth rate for the S&P 500 would drop to 11.0%.

In concluding, Butters highlights that if these earnings projections for 2016 are correct, energy will be a positive contributor to annual earnings growth for the S&P 500 for the first time in six years (since 2011).