S&P 500 earnings set to decline for a second straight quarter, and maybe a third
The S&P 500 looks set to suffer its first earnings recession in three years, as the number of companies cutting guidance is among the highest seen in the past 13 years.
The unofficial start of the second-quarter earnings reporting season is less than two weeks away, and preliminary reports suggest the outlook keeps getting worse. The blended year-over-year growth estimate for earnings per share for the S&P 500 SPX, -0.21% , which represents already reported results and the average analyst estimates of coming results, is negative 2.86% as of early Monday, with six of 11 sectors estimated to post declines, according to data provided by FactSet.
Actual reports, however, have been much worse. With 21 of the 505 S&P 500 companies, or 4.2%, having already reported results, actual reported EPS is down 14.18% from a year ago.
Adding to the negative outlook, 114 S&P 500 companies have issued EPS guidance through July 3, with 88 companies, or 77% of that total, providing guidance that was below the average estimate of analysts. That is well above the five-year average of 74 companies that warn of earnings misses, and the second most since FactSet began tracking data in 2006.
The only time the number was higher at this stage was in the first quarter of 2016, when 92 companies warned of earnings misses. Overall EPS fell 6.58% that quarter, FactSet said.
The negative outlook comes after a 0.29% EPS decline in the first quarter. An earnings “recession” is often defined as two straight quarters of declines.
The last time the S&P 500 suffered an earnings recession was the second quarter of 2016, when earnings declined for four straight quarters.