Energy Sector Holding Back S&P 500 Revenues, Earnings

It looks like low oil prices are here to stay, and that’s not good news for the oil and gas industry. Moreover, the beleaguered energy sector has clearly become a major drag on the overall performance of the S&P 500. According to a July 24th report from FactSet Insight, ex-energy firms, the S&P 500 earnings growth rate is actually 4.1% instead of an anemic -2.2% including the oil and gas sector.

John Butters, Senior Energy Analyst for FactSet, highlights the poor numbers for the energy sector. “The Energy sector is reporting the largest year-over-year decline in earnings (-54.4%) and revenues (-38.2%) of all 10 sectors. This sector is also the largest contributor to the year-over-year decline in both earnings (-2.2%) and revenues (-4.0%) for the S&P 500 as a whole.”

S&P 500 Energy Sector

More on the energy sector dragging on overall S&P 500 index

Butters notes that if you take out the Energy sector, the blended (actual reported results and estimated results) earnings growth would be a positive 4.1% instead of a -2.2%. Furthermore, the blended revenue growth rate for the index would move up to 1.8% from -4.0%.

The FactSet Insight report also makes it clear that companies in the S&P 500 index (ex-Energy) with more global exposure are seeing weaker sales and earnings growth relative to companies (also ex- Energy) in the index with a lesser degree of international exposure.

Of note, the blended earnings growth rate for the S&P 500 (again excluding Energy sector) for the second quarter of 2015 is 4.1%. For companies in this group that produce over50% of sales in the United States., the blended earnings growth rate moves up to a robust 8.3%. For firms that produce under 50% revenue via U.S. sales, the blended earnings decrease is a mere -0.2%.

The blended sales growth rate for the S&P 500 (ex-Energy) for the second quarter of 2015 is 1.8%. For firms in this group that produce more than half of their sales in the U.S., the blended sales growth rate is 3.5%. For companies that generate more than half of their of sales in the U.S., the blended sales drop off is -2.1%.