Tahoe-Truckee Market Beat: Second quarter earnings in line with expectations
Special to the Sun
Corporate earnings are the primary driver of stock prices. Earnings reporting season is just about over. So far, 87 percent of S&P 500 companies have already reported for the second quarter.
According to research from FactSet, 73 percent of the reporting companies had earnings above their estimate, and 51 percent reported sales above the mean estimate.
So far, earnings for S&P companies have dropped about minus-1 percent, which is in line with the expectation.
The last time S&P 500 earnings dropped for a quarter was in the third quarter of 2012, and that decline was also minus-1 percent.
Revenues have dropped by minus-3.3 percent, and they also dropped in the first quarter. This has been the first back-to-back decline in revenue since the second and third quarters of 2009.
The best performing sector has been Health Care, which showed an earnings increase of 15.4 percent, and the worst performing sector has been Energy, which has been adversely impacted by the low price of oil.
The Health Care Technologies and Biotechnology industries led the Health Care sector. Earnings for the Energy sector declined by minus-56.4 percent. If the Energy sector had not dropped so much, earnings for the S&P 500 would actually be positive.
If you exclude the Energy sector, the other nine sectors in the S&P 500 would have shown a growth rate of 5.7 percent.
Looking ahead, most analysts expect year-over-year earnings to continue to decline in the third quarter, but are expected to rebound in the fourth quarter.
The most common reason cited for the relatively poor earnings was the strong US dollar, which has hurt the large multi-national companies the most.
Other factors that many companies cited as having an impact on their earnings were the slowdown in the Chinese economy and the situation in Greece.
There are still a few more companies that have yet to report, but so far. it looks like this quarter has come in just about in line with the expectations.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.