Second Quarter Earnings Growth Expectations

by Bespoke Investment Group

The first chart below shows how expectations for Q2 S&P 500 earnings growth have changed over the past four months. From the end of February through the end of April, growth expectations rose from 10.7% to 14.1%. Since the end of April, however, earnings growth expectations have drited lower and the consensus estimate currently stands at 13.3%. The peak in the Q2 earnings growth estimate coincides with the peak in the S&P 500 this year. Has the market dropped because of the drop in growth estimates, or have analysts lowered their estimates because of the market drop? Something tells us it's the latter.

Below we highlight the current consensus Q2 earnings growth expectations for the ten S&P 500 sectors. As shown, just two sectors are expected to see Q2 growth that is bigger than the S&P 500 as a whole -- Energy at 40.5% and Materials at 46.3%. Technology, Industrials and Financials are expected to see low double-digit Q2 earnings growth, while Health Care, Telecom, Consumer Discretionary and Consumer Staples have single-digit growth expectations. Utilities is the only sector with negative Q2 growth expectations.

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