{"id":10131,"date":"2020-04-18T15:46:08","date_gmt":"2020-04-18T15:46:08","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=10131"},"modified":"2020-04-18T15:46:08","modified_gmt":"2020-04-18T15:46:08","slug":"q2-20-revenue-growth-heres-the-progression-as-q2-20-is-expected-to-be-the-bottom","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=10131","title":{"rendered":"Q2 &#8217;20 Revenue Growth &#8211; Here&#8217;s the Progression as Q2 &#8217;20 is Expected to be the Bottom"},"content":{"rendered":"<p>One metric being watched closely the last 6 weeks is the progression in Q2 &#8217;20 revenue expectations.<\/p>\n<p>No surprise to readers Q2 &#8217;20 expected revenue growth has been revised lower the last few months.<\/p>\n<ul>\n<li>SP 500 revenue grew 5.8% in Q4 &#8217;19.<\/li>\n<li>SP 500 Q1 &#8217;20 revenue as of 4\/17\/20 is expected to be flat y\/y, as of 4\/17\/20<\/li>\n<li>SP 500 Q2 &#8217;20 SP 500 revenue as of 4\/17\/20 is expected to down 6.7% which is the worst quarter for SP 500 revenue since Q3 &#8217;15, when SP 500 revenue fell 4.3% y\/y.<\/li>\n<\/ul>\n<p>Here is how the Q2 &#8217;20 SP 500 sectors rank today from expected strongest-to-weakest revenue growth:<\/p>\n<ul>\n<li>Health Care: +4.5%<\/li>\n<li>Utilities: +2.0%<\/li>\n<li>Staples: +0.8%<\/li>\n<li>Tech: +0.5%<\/li>\n<li>Comm Serv: -1.3%<\/li>\n<li>Real Estate: -2.8%<\/li>\n<li>Fincl&#8217;s -4.5%<\/li>\n<li>Materials: -8.2%<\/li>\n<li>Cons Disc: -11.4%<\/li>\n<li>Industrial&#8217;s: -19.7%<\/li>\n<li>Energy: -32.3%<\/li>\n<li>SP 500: -6.7%<\/li>\n<\/ul>\n<p>Source: This Week in Earnings, IBES by Refinitiv, dated 4\/17\/20<\/p>\n<p>Because Q2 &#8217;20 is expected to be the bottom, these sector revenue growth rates are likely to represent &#8220;worst-case&#8221; growth or declines for 2020.<\/p>\n<p>Just the last three weeks, here is the progression for Q2 &#8217;20 expected revenue growth, again widely expected to be the low point for both SP 500 revenue and EPS growth:<\/p>\n<ul>\n<li><em><strong>4\/17\/20:<\/strong> <\/em>-6.7% i.e 240 basis points of negative revision<\/li>\n<li><em><strong>4\/10\/20:<\/strong><\/em> -4.3% i.e 220 basis points points of negative revision<\/li>\n<li><em><strong>4\/03\/30:<\/strong><\/em> -2.1%<\/li>\n<\/ul>\n<p>It&#8217;s no mystery that Energy and Industrial&#8217;s have been two of the hardest hit sectors (airlines are part of the Transport sector and the Transport sector was folded into Industrials early in the 2000&#8217;s).<\/p>\n<p>Here is a ranking of the SP 500 sectors by their % of market cap within the SP 500 (as of 4\/17\/20 per IBES):<\/p>\n<ul>\n<li><em><strong>Tech:<\/strong><\/em> +25.8%<\/li>\n<li><em><strong>H\/Care:<\/strong><\/em> +15.8%<\/li>\n<li><em><strong>Comm Serv:<\/strong><\/em> +10.7%<\/li>\n<li><em><strong>Financials:<\/strong> <\/em>+10.3%<\/li>\n<li><em><strong>Cons Disc:<\/strong><\/em> +10.3%<\/li>\n<li><em><strong>Staples:<\/strong> <\/em>+7.9%<\/li>\n<li><em><strong>Industrials:<\/strong><\/em> +7.7%<\/li>\n<li><em><strong>Utilities:<\/strong> <\/em>+3.5%<\/li>\n<li><em><strong>Real estate:<\/strong><\/em> +3%<\/li>\n<li><em><strong>Energy:<\/strong><\/em> +2.6%<\/li>\n<li><em><strong>Materials:<\/strong><\/em> +2.4%<\/li>\n<li>SP 500: 100%<\/li>\n<\/ul>\n<p>The largest 5 sectors of the SP 500 comprise 62% of the index, while the bottom 5 sectors comprise roughly 18% of the SP 500 index, with the point being that Energy and Industrials as sectors don&#8217;t mean nearly as much as they did even 10 years ago, within the Sp 500.<\/p>\n<p><em><strong>Summary \/ conclusion: <\/strong><\/em>Q2 &#8217;20 is widely expected to be the bottom of the Covid-19 pandemic crisis from an expected trough in the SP 500 revenue and EPS are concerned.<\/p>\n<p><em><strong>\u00a0<\/strong><\/em><\/p>\n<figure id=\"attachment_10135\" aria-describedby=\"caption-attachment-10135\" style=\"width: 300px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/fundamentalis.com\/?attachment_id=10135\" rel=\"attachment wp-att-10135\"><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-10135\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/earningscorecard41720-300x105.png\" alt=\"\" width=\"300\" height=\"105\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/earningscorecard41720-300x105.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/earningscorecard41720-768x270.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/earningscorecard41720.png 908w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><figcaption id=\"caption-attachment-10135\" class=\"wp-caption-text\">click to open \/ enhance<\/figcaption><\/figure>\n<p>Note the y\/y growth rates in the above table and how the chronology works.<\/p>\n<p>What we want to watch is the Q3 and Q4 &#8217;20 quarters and how they change as America gradually reopens and how the companies get innovative to reinvigorate growth.<\/p>\n<p>Even though Q2 &#8217;20 guidance will be lowballed and probably &#8220;worst-case&#8221; listen to see if CEO&#8217;s talk about the 3rd and 4th quarters and what is said about the rest of 2020.<\/p>\n<p>The above graph and table have been pretty consistent i.e. the worst in terms of 2020 will be in Q2 in terms of SP 500 revenue and EPS growth.<\/p>\n<p>Take all these comments with substantial skepticism. These projections and estimates will change daily and weekly.<\/p>\n<p>Thanks for reading.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>One metric being watched closely the last 6 weeks is the progression in Q2 &#8217;20 revenue expectations. No surprise to&hellip;<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[114],"tags":[],"class_list":["post-10131","post","type-post","status-publish","format-standard","hentry","category-sp-500-revenue-growth"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/10131","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10131"}],"version-history":[{"count":4,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/10131\/revisions"}],"predecessor-version":[{"id":10136,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/10131\/revisions\/10136"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10131"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10131"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10131"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}