August 17, 2018

This Week in Earnings 18Q2 | Aug. 17

by David Aurelio.

Last Update: Aug. 17, 2018

Tajinder Dhillon contributed to this report.

To download the full This Week in Earnings report click here.

Aggregate Estimates and Revisions

  • Second quarter earnings are expected to increase 24.6% from Q2 2017. Excluding the energy sector, the earnings growth estimate declines to 21.6%.
  • Of the 467 companies in the S&P 500 that have reported earnings to date for Q2 2018, 79.2% have reported earnings above analyst expectations. This is above the long-term average of 64% and above the average over the past four quarters of 75%.
  • Second quarter revenue is expected to increase 9.4% from Q2 2017. Excluding the energy sector, the revenue growth estimate declines to 8.3%.
  • 72.1% of companies have reported Q2 2018 revenue above analyst expectations. This is above the long-term average of 60% and above the average over the past four quarters of 72%.
  • For Q3 2018, there have been 55 negative EPS preannouncements issued by S&P 500 corporations compared to 33 positive, which results in an N/P ratio of 1.7 for the S&P 500 Index.
  • The forward four-quarter (3Q18 – 2Q19) P/E ratio for the S&P 500 is 16.8.
  • During the week of Aug. 20, 18 S&P 500 companies are expected to report quarterly earnings.

18Q2 Earnings Growth Highlights

The estimated earnings growth rate for the S&P 500 for 18Q2 is 24.6%. If the energy sector is excluded, the growth rate declines to 21.6%. The S&P 500 expects to see share-weighted earnings of $337.3B in 18Q2, compared to share-weighted earnings of $270.7B (based on the year-ago earnings of the current 505 constituents) in 17Q2.

All of the 11 sectors in the index expect to see an improvement in earnings relative to 17Q2. The energy and materials sectors have the highest earnings growth rates for the quarter, while the real estate sector has the weakest anticipated growth compared to 17Q2.

The energy sector has the highest earnings growth rate (123.1%) of any sector. It is expected to earn $18.0B in 18Q2, compared to earnings of $8.1B in 17Q2. All of the six sub-industries in the sector are anticipated to see higher earnings than a year ago. The oil & gas exploration & production (2,043.6%) and oil & gas refining & marketing (111.7%) sub-industries have the highest EPS growth in the sector. If these sub-industries are removed, the growth rate declines to 59.8%.

The materials sector has the second highest earnings growth rate (40.0%) of any sector. It is expected to earn $7.7B in 18Q2, compared to earnings of $5.5B in 17Q2. Ten of the 11 sub-industries in the sector are anticipated to see higher earnings than a year ago. The copper (241.2%) and fertilizers & agricultural chemicals (177.8%) sub-industries have the highest EPS growth in the sector. If these sub-industries are removed, the growth rate declines to 25.8%.

The real estate sector has the lowest earnings growth rate (3.0%) of any sector. It is expected to earn $7.7B in 18Q2, compared to earnings of $7.5B in 17Q2. Three of the eight sub-industries in the sector are anticipated to see lower earnings than a year ago. The industrial reits (-11.7%) and office reits (-6.3%) sub-industries have the lowest EPS growth in the sector. If these sub-industries are removed, the growth rate improves to 5.5%.

18Q3 Earnings Growth Highlights

The estimated earnings growth rate for the S&P 500 for 18Q3 is 22.4%. If the energy sector is excluded, the growth rate declines to 19.5%. The S&P 500 expects to see share-weighted earnings of $342.2B in 18Q3, compared to share-weighted earnings of $279.5B (based on the year-ago earnings of the current 505 constituents) in 17Q3.

All of the 11 sectors in the index expect to see an improvement in earnings relative to 17Q3. The energy and financials sectors have the highest earnings growth rates for the quarter, while the real estate sector has the weakest anticipated growth compared to 17Q3.

The energy sector has the highest earnings growth rate (98.8%) of any sector. It is expected to earn $20.8B in 18Q3, compared to earnings of $10.4B in 17Q3. All of the six sub-industries in the sector are anticipated to see higher earnings than a year ago. The oil & gas exploration & production (1,826.3%) and oil & gas drilling (220.5%) sub-industries have the highest EPS growth in the sector. If these sub-industries are removed, the growth rate declines to 59.6%.

The financials sector has the second highest earnings growth rate (45.4%) of any sector. It is expected to earn $62.3B in 18Q3, compared to earnings of $42.8B in 17Q3. Eleven of the 12 sub-industries in the sector are anticipated to see higher earnings than a year ago. The property & casualty insurance (1,1503.8%) and multi-line insurance (315.5%) sub-industries have the highest EPS growth in the sector. If these sub-industries are removed, the growth rate declines to 30.9%.

The real estate sector has the lowest earnings growth rate (4.3%) of any sector. It is expected to earn $7.6B in 18Q3, compared to earnings of $7.3B in 17Q3. One of the eight sub-industries in the sector are anticipated to see higher earnings than a year ago. The health care REITs (-7.0%) and residential REITs (1.0%) sub-industries have the highest EPS growth in the sector. If these sub-industries are removed, the growth rate declines to 7.2%.

Exhibit 1: S&P 500: Estimate Revisions by Sector

Exhibit 2: S&P 500: Estimate Revisions History

Source: Thomson Reuters I/B/E/S

Exhibit 3: All U.S. Companies: Estimate Revisions by Sector

Exhibit 4: All U.S. Companies: Estimate Revisions History

Source: Thomson Reuters I/B/E/S

Please note: if you use our earnings data, please source Thomson Reuters I/B/E/S

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