FactSet noted that third-quarter bottom-up EPS estimate for all the companies listed in the S&P 500 fell by 3.5% to $29.01 from $30.07. The value of the index also dropped 6.9% to 1,920.03 from 2063.11 during the period.
S&P 500 experienced second consecutive quarter of decline
The third quarter marked the second consecutive quarter of decline for the S&P 500’s value and bottom-up EPS estimate. The financial research and investment analytics provider noted that the last time the index experienced a decline in both value and the bottom-up EPS estimate for two straight quarters was in the second and third quarter of 2011.
According to FactSet, the estimated 3.5% earnings declined for the third quarter was lower than the trailing 5-year (3.6%) and 10-year averages (5.1%) for the quarter.
During the period, fewer companies lowered its guidance—76 out of the 108 S&P 500 companies or 70% issued negative EPS guidance and 32 issued positive EPS guidance. The five-year average was 72%.
The energy sector is expected to suffer the largest earnings drop (-64.5%) year-over-year while the telecom services (+17.8%) and consumer discretionary (+10.3%) sectors are expected to report the biggest earnings growth for the quarter.
S&P 500 estimates sales decline
FactSet noted that analysts estimated that sales decline for S&P 500 companies will be 3.4% in the third quarter. Companies in the energy sector are expected to record that largest sales decline (-38.8%) year-over-year while the telecom (+13.8%) and health care (+8.1%) sectors will post the biggest sales increase for the period.
Looking forward, analyst do not expect the S&P 500 companies to return to earnings growth until the fourth quarter of 2015 and revenue growth until the first quarter of 2016. However, they projected the resumption of record level EPS in the fourth quarter this year.
Furthermore, analysts estimated that net profit margins for the second of 2015 will be lower than the Q2 2015 levels based on per share estimates.
Analysts expected AT&T to be the largest contributor to earnings growth and revenue growth in the third quarter. The company is expected to deliver earnings of $0.68 per share, higher than the $0.63 per share recorded in the third quarter of 2014. AT&T is projected to achieve $40.8 billion in revenue compared with its $33 billion in revenue last year.