S&P 500 earnings rose 1.4% year-over-year during Q1. That’s not much, but industry analysts expected a drop of 4% at the start of that quarter’s earnings season. Among the sectors, the big loser was energy. Excluding it, earnings rose impressively by 11.2% year-over-year. Here is the rundown of Q1’s earnings performance derby from best to worst: financials (19.6%), health care (19.4%), information technology (10.3%), consumer discretionary (8.1%), industrials (5.5%), consumer staples (4%), utilities (2.4%), materials (2%), telecommunication services (1.8%), and energy (-59.7%).
Q2 might also show underlying strength. Industry analysts are currently estimating that S&P 500 earnings will be down 4.5% year-over-year during the quarter. The latest analysts’ earnings consensus performance derby for the sectors is as follows: financials (14.7%), consumer discretionary (7.1%), telecom (5.6%), health care (4.1%), information technology (3%), materials (1.2%), utilities (0.9%), industrials (-0.3%), consumer staples (-2.9%), and energy (-63.8%). Excluding Energy, the consensus currently expects a 4.8% gain in Q2 results.
Given that the price of oil crashed during the second half of last year, energy earnings might continue to weigh on aggregate earnings during Q3, but have a diminishing impact from Q4 into next year. That’s assuming the price of oil won’t be dropping again anytime soon, as I do. That might be a bad assumption if the sanctions on Iran’s oil exports are lifted. I am also assuming that the trade-weighted dollar isn’t going much higher. That might be a bad assumption if Greece exits the eurozone, which I am not expecting.
Source: Ed Yardeni — Ed Yardeni is the president and chief investment strategist of Yardeni Research Inc., a provider of independent investment strategy and economics research for institutional investors.