The blended (combines actual results for companies that have reported and estimated results for companies yet to report) revenue growth rate for the S&P 500 increased to 0.1% during the week of July 25, which is above the year-over-year decline of -0.3% at the end of last week and the year-over-year decline of -0.8% at the end of the second quarter (June 30 ). If the index reports growth in revenues for the quarter, it will mark the first time the index has seen year-over-year growth in sales since Q4 2014 (2.0%).
Breaking Down the Growth
What is behind the increase in the revenue growth rate for the second quarter during this earnings season?
Two factors typically drive the improvement in the revenue growth rate during an average earnings season: the number (or percentage) of companies that report revenues above estimates and the aggregate amount by which companies report revenues above (or below) estimates.
Related: Will S&P 500 Earnings Decline in Q2?
For Q2 to date, the percentage of companies reporting revenues above estimates (57%) is slightly above the five-year average (55%). The aggregate amount by which companies are reporting revenues above estimates for Q2 (+1.2%) is twice as large as the five-year average (0.6%). So, while both numbers are above average, the surprise percentage for Q2 is the main driver of the increase in the Q2 revenue growth rate since June 30.
At the sector level, six sectors are currently reporting revenues above estimates by 1.2% or more for the second quarter. Of these six sectors, five have also recorded an increase in revenue growth of 1 percentage point or more since June 30. Of these five sectors, the Energy sector has recorded both the largest aggregate surprise percentage to date for revenues at +2.9%, and the largest percentage point improvement in revenue growth to date since June 30 at 4.0 percentage points (to -23.7% from -27.7%).
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