More than 84% of companies in the S&P 500 Index have now released their second quarter earnings reports, and so far, those results have outperformed consensus estimates by 4.6%. Revenues have been slightly higher than expected, although investors remain concerned about the cautious guidance issued widely across the index.

Earnings outperformance led by Discretionary, Energy

In a report dated Aug. 5, Morgan Stanley analyst Adam S. Parker, PhD. and his team noted that the Consumer Discretionary, Financial, and Healthcare sectors have offered the greatest upside to estimates. Within those sectors, Amazon; Bank of America and Citigroup; and Gilead Sciences, Bristol Myers, and Pfizer led the way, respectively. (All charts/ graphs in this article are courtesy Morgan Stanley.)

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Energy and Healthcare led revenue upside. In Energy, the companies which offered the most upside were, ExxonMobil and Chevron, while in Healthcare, Gilead Sciences and Bristol Myers were on top.

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Guidance still a key factor in sentiment

Numerous companies across the S&P 500 have issued cautious guidance for the second half of the year, and investors have made it clear that they're unhappy about this. The Morgan Stanley team reports that there are twice as many cases of negative guidance compared to consensus estimates as there are positive cases compared to estimates.

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In spite of the skew toward negative guidance, Parker and his team say guidance is less negative than it has been over the last several quarters. The companies which have issued the worst guidance relative to consensus estimates include Procter & Gamble, United Technologies and Whole Foods.

They believe this is because the bar is "already low enough, further noting that in the last month, earnings estimates for the S&P 500 have been revised upward by 0.2%. Telecom led the way with an upward revision of 7.8%. Revisions for Financials and Healthcare were also positive.

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Morgan Stanley's top-down estimate is $124 per share in earnings for the index, which is higher than consensus estimates and represents a growth rate of about 4% for operating earnings. The consensus estimate is $119.62 per share for bottom-up earnings.

The analysts believe that earnings estimates will climb later this year, although they usually see continued declines in estimates as years go on. They noted that already recent earnings estimates for the S&P 500 have been revised upward.

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Investors also focused on margins

The Morgan Stanley team reports that Wall Street is rewarding companies which beat consensus estimates in aggregate.

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They also say that investors appear to be paying close attention to margins, noting that companies which demonstrated margin expansions during the second quarter are also being reward. On the other hand, companies which saw their margins contract are being penalized.

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China, U.S. dollar impact Q2 earnings

In terms of macroeconomic factors which are weighing on Q2 earnings are expected weakness in China due to the issues in the nation's stock markets. Currencies also continued to weigh on earnings. Although some analysts had though the strong U.S. dollar would be a little less of a factor during the second quarter earnings season because it had weakened a bit, companies' managements continued to cite currency headwinds as a major factor.

Additionally, the Morgan Stanley team said they've heard a few comments about wage pressure, and crude oil has also triggered negative estimate revisions to Energy companies. ExxonMobil's and Chevron's earnings misses especially brought estimates lower. Outside of integrated oil companies, however, they noted upside in the rest of the Energy sector.