How are SP 500 Earnings Expected to Change Between Q2 ’16 and Q3 ’16 ?

With just 10 days left in the 3rd quarter, 2016, here is how SP 500 earnings changed after the Street saw their Q2 ’16 financial results: The important consideration here is that – normally – Street estimates hit their nadir within the last 2 weeks of the prior quarter, and the first two weeks of that reporting quarter and then typically increase as the actual quarter is reported.

  • Consumer Disc: +14.2% today vs 9.0% on July 1 for a 520 basis point improvement
  • Consumer Spls: 1% today vs -1.7% as of July 1 for 270 basis point improvement
  • Energy: -84.9% today, versus -78.5% as of July 1 for a 640 basis point deterioration
  • Financials: -3.8% today, versus -3.6% as of July 1 for a 20 basis point deterioration (this is “ex Real estate”)
  • Health Care: +7.5% today vs +4.5% as of July 1 for a 300 basis point improvement
  • Industrial’s: +3.1% today versus 4.2% as of July 1 for a 110 basis point deterioration
  • Basic Materials: -6.9% today versus -10.6% as of July 1 for a 370 basis point improvement
  • Technology: +1.7% today versus -6.0% as of July 1 for a 770 basis point improvement
  • Telecom: -1.2% today versus -0.9% as of July 1 for a 30 basis point deterioration
  • Utilities: +4.6% today versus +2.1% as of July 1 for a 250 basis point improvement
  • Real Estate: -12.8% today vs -11.7% as of July 1 for a 110 basis point deterioration
  • SP 500: -3.8% today vs -3.6% as of July 1 for a 20 basis point deterioration

Let’s rank the 2nd quarter results by greatest improvement to worst deterioration

  • Technology: +770 bp’s
  • Cons Disc: +520 bp’s
  • Basic Mat: +370 bp’s
  • Health Care: +300 bp’s
  • Cons Spls: +270 bp’s
  • Ute’s: +250 bp’s
  • Financial’s: -20 bp’s
  • Telecom: -30 bp’s
  • Real Estate: -110 bp’s
  • Energy: -640 bp’s

How is Q3 ’16 looking ? Q3 ’16 could be the first positive quarter of SP 500 earnings growth since Q2 ’15

  • Basic Mat: +7% expected growth as of 9/20/16
  • Health Care: +5.6%
  • Technology +4.2% (still one of the only sectors to see Q3 ’16 estimates improve since July 1 ’16)
  • Cons Disc: +3.5%
  • Cons Spls: +3.3%
  • Utilities: +2.5%
  • Real estate: +1.4%
  • Financials: +1.0%
  • Industrial’s -2.5%
  • Telco: -3.4%
  • Energy: -65.2%

Consumer Discretionary is expecting the biggest change in Q3 ’16, growing just 3.5% after printing +14.2% in Q2 ’16. Industrial’s don’t look good either although the numbers are still small. Energy is the big wild card. There are still basically 3 – 4 weeks until we hear from the first companies about Q3 ’16 so these numbers will change.

It is worth repeating the Technology sector is seeing positive revisions to the quarter – very unusual and a good sign. Tech should be strong through Spring ’17.

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