The Q2 earnings reporting season is just barely starting to get underway with a handful of early reporters such as Micron Technology releasing their results. Micron’s results weren’t all that bad, but its guidance was quite weak, marking the seventh consecutive quarter in which the company’s outlook came up short of expectations.

Wall Street is expecting another dismal quarter for the S&P 500 with consensus now pointing to a 5% year over year decline in earnings for the index. This would mark the fourth quarter in a row in which S&P 500 earnings have declined year over year.

Q2 earnings projected to fall 5%

S&P Capital Global Market Intelligence Senior Analyst Lindsey Bell said in her Q2 earnings update this week that Wall Street is forecasting earnings of $28.28 per share for the index. She adds that only four of the ten sectors in the S&P 500 are currently expected to post growth for the second quarter. Consumer Discretionary is leading the way.

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Energy is again expected to be the biggest drag on the index, although the decline is expected to be a major improvement from the first quarter. Materials, Financials and Information Technology are also expected to struggle, however, and even without the drag from Energy, Q2 earnings for the S&P 500 would still be in the negative at -0.4%.

Earnings growth expected to return for Q3

Bell said Wall Street is currently projecting a return to growth for the third quarter, although Energy and Telecom Services are still expected to post earnings declines for the quarter.

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Q2 earnings beat rate currently very low

At this point only 21 companies have released their Q2 earnings reports, but so far the beat rate is extremely low. Bell said it sits at 48%, compared to the historic average of 66%. The beat rate should rise as more reports come in.

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She added that the S&P 500 currently trades at about 17.3 times its forward price to earnings ratio, representing a premium to its 15-year average.

Next week the Q2 earnings reports continue to trickle in with PepsiCo’s report set for Thursday. The Q2 earnings reporting season doesn’t really kick into gear until July 11, however, when Alcoa reports. Many analysts and investors consider the aluminum maker’s earnings report as the unofficial start to earnings season each quarter.

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