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.”
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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%.