S&P 500 May See Declines For 2016 by John Butters, Senior Earnings Analyst – FactSet
For the first quarter of 2016, the actual year-over-year earnings decline reported by the S&P 500 was -6.7%. For the second quarter of 2016, the blended (combines actual results for companies that have reported and estimated results for companies yet to report) year-over-year earnings decline for the S&P 500 stands at -3.5%. For the third quarter of 2016, the estimated earnings decline stands at -1.7%. For the fourth quarter of 2016, the estimated earnings growth rate is 5.7%.
Given that the index is expected to report earnings declines for the first three quarters of 2016, what are analyst expectations for year-over-year earnings for all of 2016? Do analysts believe earnings will decline for all of 2016 also?
The answer is yes. As of today, the estimated earnings decline for the S&P 500 for CY 2016 stands at -0.3%. However, expectations for earnings growth for CY 2016 have been falling not just over the past few weeks, but over the past several months. On December 31, the estimated earnings growth rate for CY 2016 was 5.9%. By March 31, the estimated earnings growth rate had declined to 1.3%. By June 30, the estimated earnings growth rate had decreased to 0.1%. Today, it stands at -0.3%.
If the index reports a year-over-year decline in earnings for CY 2016, it will mark the first time the index has reported two consecutive years of earnings declines since CY 2008 (-25.4%) and CY 2009 (-8.0%).
At the sector level, four sectors are projected to report a year-over-year decline in earnings for CY 2016, led by the Energy sector (-72.0%).
The Energy sector is expected to the largest contributor to the year-over-year earnings decline for the index for the full year. If the Energy sector is excluded, the estimated earnings growth rate for the S&P 500 for CY 2016 would improve to 2.8%.
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