25% of S&P 500 companies have reported Q2 earnings:
68% have reported better than expected earnings, beating estimates (this is equal to the 4 year average of "beats", but slightly better than the 5 year average of 67%).
The blended actual earnings plus estimated earnings (for those not having reported yet) is - 3.7% (vs. -5.5% expected at the end of June).
As we have suggested and is evident in the historical data, companies like to under-estimate and over deliver: The 5 year average of earnings "beats" adds 4.2% to expected revenues, which would put the neutral earnings growth level at -2.7% for Q2 (from the originally expected -5.5%).
To date, earnings (from the reporting companies) are 6.7% higher than expected (vs. the 4.2% 5 year average).
In a nutshell, earnings are off to a better than average start.
This coming week (July 25- 29), close to 40% of S&P 500 companies will report Q2 earnings.
Apple earnings results (to be reported on July 26) are a relatively significant contributor to the over-all results: Q2 earnings are expected to be $1.40 per share vs $1.85 a year ago.
Over the last 3 years, the I-phone product segment has generated approximately 60% of Apples revenue. The I-phone product segment is expected to show a decline in revenue of 22% over the last year.
Apple has a weight of just a little under 3% of the S&P 500.
Looking forward to Q3, analysts are now estimating a slight decline in Q3 earnings growth:
At the beginning of April analysts expectations for Q3 were for an earnings growth rate of 3.3%. This has been lowered to - 0.1%.
(all data is courtesy of FactSet: July 22, 2016 report)
Sunday, July 24
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist